Practice Test

Q1) Which of the following factor generally contribute to the value of goodwill of a firm ? Show Answer

Q2) Which of the following factor generally contribute to the value of goodwill of a firm ? Show Answer

Q3) In which of the following case the need for the valuation of goodwill in a firm may arise ? Show Answer

Q4) Which of the following formula is used to calculate goodwill under simple average profit method ? Show Answer

Q5) Which of the following formula is used to calculate goodwill under weighted average profit method ? Show Answer

Q6) Which of the following formula is/are used for valuation goodwill under super profit basis ? Show Answer

Q7) Sometimes the value of goodwill has to be inferred from the agreement of capital and profit sharing ratio among the partners,is known as_______ Show Answer

Q8) The profits of last 5 years Rs.60,000,Rs.67,500,Rs.52,500,Rs.75,000,Rs.60,000.Find the value of goodwill,If it is calculated on average profits of last 5 years on the basis of 3 years of purchase Show Answer

Q9) On 1st April,2011 on the admission of a new partner,it is a agreed that goodwill of the firm is valued at 3 years purchase of average profits for the lase 5 years.The profits for last 5 years have been as follows.Year ended Profit/Loss31-3-2011 16,11031-03-2012 11,85031-03-2013 8,14531-03-2014 (600)31-03-2015 12,750value of goodwill will be___ Show Answer

Q10) On 1st April,2011 on the admission of a new partner,it is a agreed that goodwill of the firm is valued at 2 years purchase of weighted average profits for the lase 3 years.The profits for last 3 years have been as follows.Year ended Profits Weight31-03-2011 45,000 131-03-2012 52,500 231-03-2013 72,000 3Value of goodwill will be_______ Show Answer

Q11) Find the goodwill from the following information:Capital employed - RS.11,00,000Rate of normal return - Rs.10%Future maintainable profit - Rs.2,00,000No.of year purchase - 3 yrars Show Answer

Q12) Find the goowwill of the firm using capitalization method from the folowing information:Total capital employed in the firm Rs.4,80,000.Rate of normal return-15%.Profit for the year Rs.90,000 Show Answer

Q13) Average profit of a fimr is Rs.1,20,000.The rate of capitalization is 12%.Assets and liabilities of the firm are Rs.10,00,000 and Rs.4,25,000 respectively Show Answer

Q14) A firm of X,Yand Z has a total capital investment of Rs.3,60,000.The firm earned net profit during the last year as Rs.56,000,Rs.64,000,Rs96,000 and Rs.80,000.The fair return on the net capital employed is 15%.Value of goodwill if it is based on 3 year's purchase of the average super profit of past four years. Show Answer

Q15) Find goodwill from the following information:Capital employed -Rs.8,25,000.Rate of normal return-10%.Future maintainable profit-Rs.1,50,000.Annuity factor-Rs.3.17 Show Answer

Q16) The net profit after tax of Z & Co.for the past 5 years are as follows.Year Profit 2007-2008 2,56,0002008-2009 2,64,0002009-2010 3,76,0002010-2011 4,86,0002011-2012 5,30,500The capital employed is Rs.16,00,000.Rate of normal return is 15%.Calculate the value of the good will on the basis of annuity method on super profit basis,taking the prestnt value of an auuity of Re.1 for the 4 years at 15% as Rs.2.855. Show Answer

Q17) The net profit after tax of NZ&Co. for the past 5 years are as followsYear Profit2010-2011 20,0002011-2012 2,61,0002012-2013 3,12,000Closing stock for 2011-2012 and 2012-2013 includes the defective items of Rs.22,000 and Rs.62,000 respectively which were considered as having no market value.Calculate goodwill on average profit method. Show Answer

Q18) From the following information calculate the value of goodwill.The adjusted forecast maintainable profit is Rs.40,000,Capital employed is Rs.2,00,000,Normal rate of return is 15%,Capitalizaton rate is 20%. Show Answer

Q19) The net profits of a business,after providing for income tax for the last 5 years were: Rs.80,000,Rs.1,00,000,Rs.1,20,000,Rs.1,25,000 and Rs.2,00,000 respectively.The capital employed in the business is Rs.10,00,000 and the normal rate of return is 10%.calculate the value of the goodwill on the basis of the annuity method taking the present value of annuity of Re.1 for 5 years at 10% is 3.7907 Show Answer

Q20) Capital employed by a partnership firm is Rs.1,00,000.Its average profit is Rs.20,000.Normal rate of return is 15%. Value of goodwill by capitalization method is Show Answer

Q21) The profit and losses for the last years are:Year Profit2001-2002 (20,000)2002-2003 (5,000)2003-2004 1,96,0002004-2005 1,52,000The average capital employed in the business is Rs.4,00,000.The rate of interest expected from capital invested is 12%.The remuneration of partners is estimated to be Rs.2,000 P.m.not charged in the above losses/profit.Calculate the value of good will on the basis of 2 years purchase of super profit based on the average of four years. Show Answer

Q22) H and M are partners in a firm sharing profits and losses in the ratio of 3:2.Their capitals are Rs.90,000 and Rs.60,000 repectively.They admit k as new partner who will get 1/6th share in the profits of the firm.K breing in Rs.37,500 as his share capital.Calculate hidden goodwill ? Show Answer

Q23) X,Y and Z are partners in a firm . At the time of division of profit for the year there was dispute among the partners . Profit before Interest on partners capital was Rs 10,000 and X wanted interest on capital @ 20 % as his capital contribution was Rs 1,00,000 as compared to that of Y and Z which was Rs 75,000 and Rs 50,000 respectively. Find the solution . Show Answer

Q24) The following trading result are available in respect of the business carried on by a firm :
2001 Loss Rs 10,000
2002 Loss Rs 5,000
2003 Profit Rs 80,000
2004 Profit Rs 55,000
The value of good will on the basis of 5 years purchase of average profit of the business will be : Show Answer

Q25) X and Y share profit and losses in the ratio of 2:1 .They take Z as a partner and the new profit sharing ratio becomes 3:2:1 . Z brings Rs 5,000 as premium for goodwill. The full value of goodwill be : Show Answer

Q26) Find the goodwill of the firm using capitalization method from the following information :
Total Capital Employed in the firm Rs 8,00,000
Reasonable Rate of Return 15 %
Profit for the year Rs 6,00,000
Show Answer

Q27) The capital of B and D is Rs 60,000 and Rs 30,000 respectively with the Profit sharing ratio 3:1 The new ratio admissible after 01.04.2006 is 5:3 .
Goodwill valued as Rs 80,000 will be credited to B and D's capital by Rs : Show Answer

Q28) A and B are partners sharing profit & losses in the ratio 3:2 having the capital of Rs 80,000 and rs 50,000 respectively . They are entitled to 10 % p.a. interest on capital before distributing the profits During the year, the firm earned Rs 17,800 before allowing any interest on capital . Profit appointed among them excluding interest will be :
Show Answer

Q29) A and B are partners sharing profit and losses in the ratio 4:1 C was manager who received the salary of Rs 2,000 p.m. in addition to a commission . Profit for the year is Rs 3,39,000 before charging salary . Find the total remuneration of C : Show Answer

Q30) The capital of A and B sharing profit and losses equally are Rs 90,000 and Rs 30,000 which was not recorded in the books. if goodwill is to be raised now, by what amount each partners capital account will be debited ? Show Answer

Q31) A and B are partners with a capital Rs 50,000 and Rs 40,000 respectively. They share Profits and losses equally . C is admitted on bringing Rs 50,000 as capital only and nothing was brought against goodwill . Goodwill in goodwill in the books after the admission of C ? Show Answer

Q32) A B and C partners in the firm sharing Profit ratio 5:3:2 . They decided to share profits in the future in 3:2:1 ratio. For the aforesaid purpose, goodwill of the firm is valued as Rs 60,000 Thus capital account of B will be : Show Answer

Q33) When Goodwill is not purchased goodwill account can : Show Answer

Q34) The profit of the last four years are as follows :
Year Amount (Rs)
2000 40,000
2001 50,000
2002 60,000
2003 50,000
Calculate the goodwill on the basis of three purchase of average profits : Show Answer

Q35) The Profits of the last three years are as follows
Year (Rs)
2004 17,000
2005 20,000
2006 23,000
The capital employed is Rs 80,000 . The return on capital employed is 15 % Calculate the value of goodwill on the basis of two years purchase of average super profit earned Show Answer

Q36) The capital employed in a business is Rs 1,50,000 . The profits are Rs 50,000 and the normal rate of profits is 20 % Calculate the amount of goodwill as per capitalization method : Show Answer

Q37) A and B are partners in a firm with capital of Rs 18,000 and Rs 20,000 . Z is admitted for 1/3 rd share in profits and brings RS 34,000 as capital , calculate the amount of goodwill Show Answer

Q38) The profits and loss for the last three years are :
Year Amount (Rs)
2005 20,000
2006 (10,000)
2007 15,000
calculate the goodwill on the basis of three years purchase of average profits Show Answer

Q39) The capital employed by a firm is Rs 10,00,000 and the normal rate of return is 15 % The average profits of the firm are :
Year Profis (Rs)
2002 18,000
2003 12,000
2004 15,000
2005 22,000
2006 18,000
calculate the goodwill on the basis of three years purchase of the super profit Show Answer

Q40) When goodwill is to be raised in the books when there is no good will i the books , then the entry to be passed is : Show Answer

Q41) The excess amount which the firm can get on selling its assets over and above the saleable value of its assets is called : Show Answer

Q42) Which of the following is NOT true in relation to goodwill ? Show Answer

Q43) Purchasing year means : Show Answer

Q44) The Goodwill of the firm is NOT affected by : Show Answer

Q45) The capital employed in a firm is Rs 50,000 and the normal rate of return is 20 % . The profit for the last three years are :
Year Profit(Rs)
2000 20,000
2001 25,000
2002 15,000
calculating the goodwill on the basis of capitalization of super profits : Show Answer

Q46) The net assets of a firm including fictitious assets of Rs 5,000 are Rs 85,000 . The net liabilities of the firm are Rs 30,000 . The normal rate of return is Rs 10 % and the average profit of the firm is Rs 8,000. Calculate the goodwill as per capitalization of super profits . Show Answer

Q47) Total capital employed in the firm is Rs.8,00,000. Reasonable rate of return is 15% and profit for the year is Rs.12,00,000. The value of goodwill of the firm as per capitalization method would be: Show Answer

Q48) Calculate the amount of goodwill for 3 years purchase of following 5 years Rs 2,00,000, 2,80,000, 3,20,000, 2,40,000 (including loss 4,000), (14,000) Show Answer

Q49) A firms earns a profit of Rs. 1,10,000. The normal rate of return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outside liabilities are Rs. 11,00,000 and Rs. 1,00,000 respectively. The value of goodwill is: Show Answer