Practice Test

Q1) Goodwill is Show Answer

Q2) Goodwill is to be valued when Show Answer

Q3) Goodwill is paid for obtaining Show Answer

Q4) Super profit is ____ Show Answer

Q5) Normal profit is Show Answer

Q6) Normal profit depends on Show Answer

Q7) Goodwill as per purchase of average profit method Show Answer

Q8) Goodwill as per purchase of super profit method is equal to Show Answer

Q9) Normal Rate of Return depends on Show Answer

Q10) While calculating capital employed Show Answer

Q11) Any non trading income included in the profit should be Show Answer

Q12) In capitalization of super profit method goodwill is equal to Show Answer

Q13) Capital employed at the end of the year is Rs. 4,20,000. Profit earned Rs. 40,000.Average capital employed is Show Answer

Q14) Rate of interest is 11% and the rate of risk 9%. The Normal Rate of Return is Show Answer

Q15) Capital employed at the beginning of the year is Rs. 5,20,000 and the profit earned during the year is Rs. 60,000. Average capital employed during the year is Show Answer

Q16) Average profit of Rs. 19,167 and the normal profit is Rs. 10,000. The super profit is Show Answer

Q17) Super profit is Rs. 9,167 and the Normal Rate of Return 10% Goodwill as per capitalized of Super profit method is equal to Show Answer

Q18) Capital employed is Rs. 50,000 Trading Profit amounted Rs. 21,650, Rs. 15,000 and Rs. 2,000 loss for 2008, 2009 and 2010 respectively. Rate of interest is 8% and the rate of risk is 2% Remuneration from alternative employment of the proprietor is Rs. 3,600 pa. Amount of Goodwill at 3 years. Purchase of super profit is Show Answer

Q19) Shares are to be valued on Show Answer

Q20) Quoted shares are those shares which are Show Answer

Q21) Under net assets method value of a share depends on Show Answer

Q22) Net assets value is also called as Show Answer

Q23) While deciding net assets value fictitious assets Show Answer

Q24) Net assets value method is based on the assumption that the company is Show Answer

Q25) Yield value depends on Show Answer

Q26) F.M.P. for yield valuation is Show Answer

Q27) Yield value is based on the assumption that Show Answer

Q28) Value of a Partly paid equity share is equal to Show Answer

Q29) Following details are extracted from the records of a company 2000 9% Pref. Shares of Rs. 100 each Rs. 2,00,000 50,000 equity shares of Rs. 10 each Rs. 8 per share paid up Rs. 4,00,000 Expected Profit Rs. 2,18,000
Tax Rate Rs. 40% Transfer to general reserve 20% Normal rate earning 15% Yield value per share is Show Answer

Q30) Gross assets are Rs. 1,01,000, fictitious assets. Rs.350 are included in the gross assets. External liabilities are Rs. 7,500. 6% prefer share capital is Rs. 45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs. 8,500. Transfer to reserves is 10%. Pref. dividend is payable. NRR is 9%. The Net Asset Value Per share is Show Answer

Q31) Gross assets are Rs. 1,00,000, fictitious assets. Rs. 350 are included in the gross assets. External liabilities are Rs. 7,500. 6% prefer share capital is Rs. 45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs. 8,500. Transfer to reserves is 10%. Pref. dividend is payable. NRR is 9%. The Net Asset Value Per share is Show Answer

Q32) The company earns a net profit of Rs. 24, 000 with a capital of Rs. 1,20,000. The NRR is 10%. Under capitalization of super profit, goodwill will be Show Answer

Q33) Average capital employed Rs. 14,00,000. Net profit 2011 Rs. 2,50,000, 2012 Rs. 1,00,000 loss and 2013 Rs. 4,50,000. NRR 10%
Goodwill at 3 years purchase of super profit will be : Show Answer

Q34) Average capital employed Rs. 14,00,000. Net profit 2011 Rs. 2,50,000
2012 Rs. 1,00,000 loss, 2013 Rs. 4,50,000 NRR 10%
Goodwill by capitalization of Super profit will be : Show Answer

Q35) Equity shares of Rs. 10 each Rs. 22,00,000 15% Pref. shares of Rs.100 each Rs. 18,00,000
total Rs. 40,00,000
Average Net Profit 10,50,000 NRR 20%
Net Tangible assets are revalued by
Rs. 2,00,000 more than the amounts at which they are stated in the books. Super profit of the company will be : Show Answer

Q36) 15% Pref. shares of Rs. 100 each Rs. 18,00,000 total Rs. 40,00,000 Average Net Profit 10,50,000 NRR 20% Net Tangible assets are revalued by Rs. 2,00,000 more than the amounts at which they are stated in the books. Intrinsic value per share will Show Answer

Q37) 15% Pref. shares of Rs.100 each Rs.18,00,000 total Rs.40,00,000 Average Net Profit 10,50,000 NRR 20% Net Tangible assets are revalued by Rs. 2,00,000 more than the amounts at which they are stated in the books. Intrinsic value per share will be Show Answer

Q38) 15% Pref. shares of Rs. 100 each
Rs. 18,00,000 total Rs. 40,00,000 Average Net Profit 10,50,000 NRR 20% Net Tangible assets are revalued by
Rs. 2,00,000 more than the amounts at which they are stated in the books. Yield value per share will be Show Answer

Q39) Goodwill is an intangible fixed assets which has a realizable value. Show Answer

Q40) Goodwill can be realized at any time. Show Answer

Q41) Goodwill is fictitious assets. Show Answer

Q42) Goodwill depends on personal reputation of the enterprise. Show Answer

Q43) Goodwill consists of the super earning power. Show Answer

Q44) Goodwill may be purchased or non purchased. Show Answer

Q45) Accounting system recognized only purchased Goodwill. Show Answer

Q46) Non purchased goodwill is recognized in financial statements. Show Answer

Q47) FMP is considered in valuation of goodwill. Show Answer

Q48) FMP is calculated on the basis of adjusted average profit. Show Answer

Q49) Super profit is the profit which is more then the Normal Profit earned by similar organizations’ in the industry. Show Answer

Q50) NRR is calculating on the basis of Rate of Interest only. Show Answer

Q51) Investment are non-trading assets. Show Answer

Q52) Fictitious assets should be included in average capital employed. Show Answer

Q53) Valuation of shares has to be done when they are to be bought and sold. Show Answer

Q54) Intrinsic value is also known as Net Assets Value. Show Answer

Q55) Yield value depends on Net Assets. Show Answer

Q56) Valuation of shares from the point of view of minority shareholders is based on dividend. Show Answer

Q57) Valuation of shares from the point of view of minority shareholders is based on FMP. Show Answer

Q58) Goodwill is an ________ assets. Show Answer

Q59) Goodwill has ________ value. Show Answer

Q60) Goodwill is not a _______ assets. Show Answer

Q61) Only _______ goodwill is accounted. Show Answer

Q62) ________ is calculated on the basis of adjusted average profit. Show Answer

Q63) ________ is equal to Rate of Interest plus rate of risk. Show Answer

Q64) Investment are ________ assets. Show Answer

Q65) ________Value depends on Net Assets. Show Answer

Q66) Yield value is calculated on the basis of ______ Show Answer

Q67) Intrinsic value is also called as _____ value. Show Answer

Q68) Yield value is calculated on the basis of _____ Show Answer

Q69) Super profit is excess of FMP over _____ Show Answer

Q70) Interest on investment is _____ income. Show Answer

Q71) Capital employed is _________ Show Answer

Q72) Capitalized value of FMP = FMP/____ x 100. Show Answer

Q73) Goodwill by capitalization of FMP method is ________ Show Answer

Q74) Goodwill by capitalization of super profit method is _________ Show Answer

Q75) Intrinsic value is calculated on the basis of _______ value of assets. Show Answer

Q76) Any expenses likely to be incurred should be ______ from average profit. Show Answer

Q77) Monetary value of the reputation, connections and profit-earning capacity a firm. Show Answer

Q78) Money value of the reputation of a concern measured in terms of its future earning capacity. Show Answer

Q79) An asset which is not fictitious but intangible in nature, having realizable value. Show Answer

Q80) Extra amount over and above the saleable values of the identifiable assets that could be fetched by selling an existing firm as a going concern. Show Answer

Q81) Amount of capital used by business concern to run its business activities. Show Answer

Q82) Rate of profit estimated or expected on capital employed. Show Answer

Q83) A rate of return normally expected by the shareholders on their investment. Show Answer

Q84) Excess of average profit earned by the firm over and above its normal profit. Show Answer

Q85) Goodwill is Show Answer

Q86) Which of the following statement is true for goodwill? Show Answer

Q87) Precise value of goodwill is known only Show Answer

Q88) Following are the factors affecting goodwill except Show Answer

Q89) Valuation of goodwill by certain number of years’ purchase of simple average profit of goodwill means Show Answer

Q90) Goodwill is Show Answer

Q91) Which of the following statement is true for goodwill? Show Answer

Q92) According to capitalization of average profits method for goodwill valuation means Show Answer

Q93) Valuation of goodwill by certain number of years’ of purchase of super profit method implies Show Answer

Q94) The most important element in valuation of goodwill is Show Answer

Q95) Following factors affect the valuation of goodwill: Show Answer

Q96) For valuation of goodwill by capitalization method, the formula for goodwill calculation is Show Answer

Q97) N Ltd. values goodwill as 2 year’s purchase of super profit. The normal earning in its line of business is 12% on capital employed. Its Balance Sheet shows fixed Assets Rs.2,10,000, current Assets Rs.1,40,000 and current liabilities Rs.35,000. The trading profits of last four years are
2014 - Rs.1,24,000 2013 - Rs.98,000
2012 - Rs.1,00,000 2011 - Rs.1,10,000
Goodwill under Super profit method
Show Answer

Q98) The average Net profits expected in the future by LMN Ltd. are Rs.36,000 per year. The average capital employed in the business by the company is Rs.2,00,000. The rate of interest expected from capital invested in this class of business is 10%. The remuneration of the Managing Director is Rs.6,000 per annum. Find the value of Goodwill on the basis of two years purchase of super profit. Show Answer

Q99) The following were the profits of a company for the last three years.
Year ending March 31 Profit (Rs.)
2011 3,00,000 (including an abnormal gain of Rs.90,000)
2012 2,40,000 (after charging an abnormal loss of Rs.1,20,000)
2013 3,60,000 ( excluding Rs.1,20,000 payable on the insurance
of plant and machinery)
Calculate the value of goodwill on the basis of four years’ purchase of the average profits for the last three years.
Show Answer

Q100) The profits and losses were : 2011 – Profit Rs.20,000; 2012 – Loss Rs.34,000; 2013 – Profit Rs.1,00,000; 2014 – Profit Rs.1,50,000. The average capital employed in the business is Rs.4,00,000. The rate of interest expected from capital invested in that class of business is 10%. The remuneration of directors is estimated to be Rs.12,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchase of Super Profit based on the average of 3 years. Show Answer

Q101) Average capital employed in M/s. X Ltd. is Rs.30,00,000 whereas net trading profits for the last three years have been Rs.14,60,000; Rs.14,45,000 and Rs.15,20,000. In these three years, a manager was paid a salary of Rs.5,000 p.m. But now he would be paid a salary of Rs.7,500 per month. Normal rate of return expected in the industry in which M/s. X Ltd. is engaged is 20%. Calculate Goodwill on the basis of two years’ purchase of the super profits. Show Answer

Q102) On 1st April 2014, an existing company had assets of Rs.1,50,000, including cash of Rs.10,000. Its creditors amounted to Rs.10,000 on that date. The company has a Reserve Fund of Rs.20,000 while Capital account showed a balance of Rs.1,20,000. If the normal rate of return is 20% and the goodwill of the company is valued at Rs.48,000 at four years’ purchase of super profits, find the average profits per year of the existing company. Show Answer

Q103) A company earns profit of Rs.2,00,000. The normal rate of return in the similar type of business is 10%. The value of total assets (excluding goodwill) and total outside liabilities as on the date of valuation of goodwill are Rs.22,00,000 and Rs.5,60,000 respectively. Calculate the value of goodwill according to Capitalization of Super Profits Method. Show Answer

Q104) Calculate the value of Goodwill according to 10 years Purchase of Super Profits method in the previous question. Show Answer

Q105) Calculate goodwill if in the company average capital employed is Rs.60,000 and normal rate of return is 10%, the average profit for last 5 years is Rs.12,000 and goodwill is estimated at 3 years’ purchase of super profits’ remuneration to directors Rs.3,000. Show Answer

Q106) Calculate goodwill if a company earns a net profit of Rs.12,000 with a capital of Rs.60,000. The normal rate of return in the business is 10%. Use capitalization of super profits method to value the goodwill. Show Answer

Q107) Calculate the value of goodwill from the following information:
(1) Total capital employed in the business Rs.4,00,000.
(2) Net profit for the past three years were Rs.53,800, Rs.45,350, Rs.56,250.
(3) Normal rate of return at 10%.
(4) Goodwill is to be valued at three years purchase of super profit.
Show Answer

Q108) M/s Tirupati Traders Ltd. capital employed is Rs.1,00,000. The normal rate of return in similar type of business is 10%.
The last three profits of M/s Tirupati Traders Ltd. are Rs.20,000, Rs.18,000 and Rs.22,000 respectively.
The Goodwill is to be valued at 2 years purchase of super profit.
Show Answer

Q109) The Capital employed is Rs.2,00,000; average profit for last 3 years is Rs.40,000 and the normal rate of return in the business is 15%.
Calculate goodwill at 4 years purchase of the super profit.
Show Answer

Q110) The Capital employed is Rs.1,50,000. The average profit for last 3 years is Rs.22,000 and the normal rate of return in business is 8%. Show Answer

Q111) The present average net profit before deducting directors remuneration is Rs.27,000 p.a. The capital employed in the business Rs.1,50,000. The profit expected from the total capital invested is 10% p.a. The total remuneration of the directors is estimated to be Rs.6,000 p.a. Find out the value of goodwill on the basis of 2 years purchases of super profits. Show Answer

Q112) Find the goodwill of the firm using capitalization method from the following information:
Total capital employed in the firm Rs.10,00,000 and reasonable rate of return 20% profits for the year Rs.12,20,000.
Show Answer

Q113) The profits for 2011-12 are Rs.3,000, for 2012-13 is Rs.39,150 and for 2013-14 is Rs.46,800. Closing stock for 2012-13 and 2013-14 includes the defective items of Rs.3,300 and Rs.9,300 respectively which were considered as having market value NIL, Average profit for valuation of goodwill is Show Answer

Q114) The profits for the last three years are 2011-12 Rs.43,000, 2012-13 profits Rs.56,500 and 2013-14 profits Rs.69,000. The total liabilities of the firm are Rs.15,00,000 of which outsides liability is Rs.10,00,000. The rate of interest expected from capital invested is 11%. Calculate the value of goodwill on capitalization basis.

Show Answer

Q115) Capital employed by partners in a firm is Rs.4,00,000. Profits of the firm during last four years are Rs.45,000, Rs.48,000, Rs.67,000 and Rs.60,000 respectively. Expected rate of return on capital employed is 10%. Calculate goodwill by 3 years purchase of super profit. Show Answer

Q116) Goodwill is Show Answer

Q117) Goodwill is to be valued when Show Answer

Q118) Goodwill is paid for obtaining Show Answer

Q119) Super profit is ____ Show Answer

Q120) Normal profit is Show Answer

Q121) Normal profit depends on Show Answer

Q122) Goodwill as per purchase of average profit method Show Answer

Q123) Goodwill as per purchase of super profit method is equal to Show Answer

Q124) Normal Rate of Return depends on Show Answer

Q125) While calculating capital employed Show Answer

Q126) Any non trading income included in the profit should be Show Answer

Q127) Under capitalization of super profit method goodwill is equal to Show Answer

Q128) Capital employed at the end of the year is Rs.4,20,000. Profit earned Rs.40,000.Average capital employed is Show Answer

Q129) Rate of interest is 11% and the rate of risk 9%. The Normal Rate of Return is Show Answer

Q130) Capital employed at the beginning of the year is Rs.5,20,000 and the profit earned during the year is Rs..60,000. Average capital employed during the year is Show Answer

Q131) Average profit of Rs. 19,167 and the normal profit is Rs.10,000. The super profit is Show Answer

Q132) Super profit is Rs.9,167 and the Normal Rate of Return 10% Goodwill as per capitalized of Super profit method is equal to Show Answer

Q133) Capital employed is Rs. 50,000 Trading Profit amounted Rs.12,200, Rs.15,000 and Rs.2,000 loss for 2008 , 2009 and 2010 respectively. Rate of interest is 8% and the rate of risk is 2% Remuneration from alternative employment of he proprietor is Rs.3.600 pa. Amount of Goodwill at 3 years. Purchase of super profit is Show Answer

Q134) Shares are to be valued on Show Answer

Q135) Quoted shares are those shares which are Show Answer

Q136) Under net assets method value of a share depends on Show Answer

Q137) Net assets value is also called as Show Answer

Q138) While deciding net assets value fictitious assets Show Answer

Q139) Net assets value method is based on the assumption that the company is Show Answer

Q140) Yield value depends on Show Answer

Q141) F.M.P. for yield valuation is Show Answer

Q142) Yield value is based on the assumption that Show Answer

Q143) Value of a Partly paid equity share is equal to Show Answer

Q144) Following details are extracted from the records of a company 2000, 9% Pref. Shares of Rs.100 each Rs.2,00,000, 50,000 equity shares of Rs.10 each, Rs.8 per share paid up Rs.4,00,000, Expected Profit is Rs.2,18,000, Tax Rate Rs.40% Transfer to general reserve 20% Normal rate earning 15 % Yield value per share is Show Answer

Q145) Gross assets are Rs.1,01,000, fictitious assets. Rs.350 are included in the gross assets. External liabilities are Rs.7,500. 6% prefer share capital is Rs.45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs.8,500. Transfer to reserves is 10%. Pref. dividend is payable. NRR is 9%. The Net Asset Value Per share is Show Answer

Q146) Gross assets are Rs.1,00,000, fictitious assets. Rs.350 are included in the gross assets. External liabilities are Rs.7,500. 6% prefer share capital is Rs.45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs.8,500. Transfer to reserves is 10%. Pref. dividend is payable. NRR is 9%. The Net Asset Value Per share is Show Answer

Q147) The company earns a net profit of Rs.24, 000 with a capital of Rs.1, 20,000. The NRR is 10% . Under capitalization of super profit, goodwill will be Show Answer

Q148) Goodwill is an intangible fixed assets which has a realizable value. Show Answer

Q149) Goodwill can be realized at any time. Show Answer

Q150) Goodwill is fictitious assets. Show Answer

Q151) Goodwill depends on personal reputation of the enterprise . Show Answer

Q152) Goodwill consists of the super earning power. Show Answer

Q153) Goodwill may be purchased or non purchased. Show Answer

Q154) Accounting system recognized only purchased Goodwill. Show Answer

Q155) Non purchased goodwill is recognized in financial statements. Show Answer

Q156) FMP is considered in valuation of goodwill. Show Answer

Q157) FMP is calculated on the basis of adjusted average profit. Show Answer

Q158) Super profit is the profit which is more then the Normal Profit earned by similar organizations’ in the industry. Show Answer

Q159) NRR is calculating on the basis of Rate of Interest only. Show Answer

Q160) Investment are non-trading assets. Show Answer

Q161) Fictitious assets should be included in average capital employed. Show Answer

Q162) Valuation of shares has to be done when they are to be bought and sold. Show Answer

Q163) Intrinsic value is also known as Net Assets Value. Show Answer

Q164) Yield value depends on Net Assets.. Show Answer

Q165) Valuation of shares from the point of view of minority shareholders is based on dividend . Show Answer

Q166) Valuation of shares from the point of view of minority shareholders is based on FMP . Show Answer

Q167) Goodwill is an _____assets. Show Answer

Q168) Goodwill has ____ value. Show Answer

Q169) Goodwill is not a ____assets. Show Answer

Q170) Only ____goodwill is accounted. Show Answer

Q171) _____ is calculated on the basis of adjusted average profit. Show Answer

Q172) ____ is equal to Rate of Interest plus rate of risk. Show Answer

Q173) Investment are _____assets. Show Answer

Q174) _____Value depends on Net Assets. Show Answer

Q175) Yield value is calculated on the basis of ______ Show Answer

Q176) Intrinsic value is also called as _____ value. Show Answer

Q177) Yield value is calculated on the basis of _____ Show Answer

Q178) Super profit is excess of FMP over _____ Show Answer

Q179) Interest on investment is _____ income. Show Answer

Q180) Capital employed is ___ ____ ____ Show Answer

Q181) Capitalized value of FMP = FMP/____ X 100. Show Answer

Q182) Goodwill by capitalization of FMP method is ______ Show Answer

Q183) Goodwill by capitalization of super profit method is ____ ____ ____ Show Answer

Q184) Intrinsic value is calculated on the basis of ____value of assets. Show Answer

Q185) Any expenses likely to be incurred should be ____ from average profit. Show Answer