DATE: 07/08/2021

ACCOUNTANY TIME: 1 Hr.

WEEKLY TEST MARKS: 30

ANSWER ALL THE QUESTIONS:(show your workings

clearly)

1. Goodwill can be classified into:

(a) Purchased Goodwill
(b) Self generated Goodwill
(c) A and B
(d) None of these

2. Goodwill is an:
(a) Tangible Assets
(b) Intangible Assets
(c) Current Assets
(d) Fictious Assets

3. Need for valuation of goodwill arise?

(a) Admission of a partner
(b) Death of a partner
(c) Retirement of a partner
(d) Change in partnership.
(e) Sale of the firm
(f) All of these.

4. Following are the factor affecting goodwill except:

(a) Nature of business.
(b) Favourable location of business
(c) Effeciency of Management
(d) Nature of goods
(e) location of the customers

5. Weighted average profit method of calculating goodwill

should be followed when:
(a) Profit has increasing trends
(b) Profit has decrease trends
(c) Profit is uneven
(d) a and b

6. Number of year purchase?

(a) Number of years’ purchase means for how many years the firms
will earn the same amount of profit because of the past efforts.
(b) Number of years’ purchase means 12 years profit.
(c) Number of years’ purchase means 15 years future profit.
(d) Number of years’ purchase means 10 years past profit.
7. Formula for average profit?
(a) Average profit =Total Normal profits/ Number of years
(b) Average profit =Total Super profits/ Number of years
(c) Average profit =Total Weighted profits/ Number of years
(d) None of these

8. Formula for super profit?

(a) Super profit= Average Profit – Normal profit
(b) Super profit= Normal profit – Average Profit
(c) Super profit= Weighted Average Profit – Normal profit
(d) Super profit= Average Profit + Normal profit

9. Formula for normal profit?

(a) Normal profit =Capital employed × Normal Rate of return /100
(b) Normal profit =Liabilities× Normal Rate of return /100
(c) Normal profit =Average profit × Normal Rate of return /100
(d) Normal profit =Super profit × Normal Rate of return /100

10. Formula for valuation of goodwill on the basis of

capitalisation of super profit.
(a) Goodwill =(Super profit×100)/(Normal Rate of return)
(b) Goodwill =(Normal profit×100)/(Normal Rate of return)
(c) Goodwill =(Average profit×100)/(Normal Rate of return)
(d) Goodwill =(Super profit×Normal Rate of return /100)

11. Formula for weighted average profit?

(a) Weighted Average profit = Total products of profit / Total of
weights
(b) Weighted Average profit = Total Normal profit / Total of
weights
(c) Weighted Average profit = Total products of profit / Number of
years
(d) Weighted Average profit = Average profit- Normal profit

12. The profit for the last five years of a firm were as
follows –
year 2012 4,02,000;
year 2013 3,98,000;
year 2014 4,55,000;
year 2015 4,45,000;
year 2016 5,00,000. goodwill of the firm is to be valued
on the basis of 3 years purchase of 5 years average
profits. goodwill of the firm?
(a) 4,40,000
(b) 13,20,000
(c) 22,00,000
(d) None of these

13. The books of a business showed that the capital

employed on March 31, 2020, 4,00,000 and the profits
for the last five years were:
March 31 2019– 50,000:
March 31 2018- 60,000;
March 31 2017- 65,000;
March 31 2016- 70,000 and
March 31 2015- 85,000. You are required to find out the
value of goodwill based on 3 years purchase of the super
profits of the business, given that the normal rate of
return is 12%. Value of goodwill of the firm?
(a) 66,000
(b) 48,000
(c) 18,000
(d) 54,000

14. Assets of the firms are 6,50,000 (excluding goodwill)

and Liabilities are 1,50,000. The profits for the last three
years were:
March 31 2019– 58,000:
March 31 2018- 72,000;
March 31 2017- 80,000;
normal rate of return is 10%.
You are required to find out the value of goodwill On the
basis of capitalisation of Average profit.
Value of goodwill of the firm?
(a) 70,000
(b) 7,00,000
(c) 5,00,000
(d) 2,00,000
15. Assets of the firms are 7,50,000 (excluding goodwill)
and Liabilities are 2,50,000. The profits for the last three
years were:
March 31 2019– 68,000:
March 31 2018- 82,000;
March 31 2017- 90,000;
normal rate of return is 10%.
You are required to find out the value of goodwill On the
basis of capitalisation of Super profit.Value of goodwill of
the firm?
(a) 70,000
(b) 7,00,000
(c) 5,00,000
(d) 3,00,000

16. Rachit purchased a business on 1st April 2019. It was

agreed to value goodwill at Two years purchase of average
normal profits of last 4 years. The Profits are as follows.
Year Ended 31st March 2016 -90,000
31st March 2017 – 1,60,000
31st March 2018 – 1,80,000
31st March 2019- 2 20,000
Following facts are noticed–
1. During the year. ended 31/march/2016, an asset was
sold at a profit of 10,000
2. During the year ended 31/March/2017, firm had
incurred a abnormal loss of 20,000
3. Repairs to car amounting to 50,000 was wrongly
debited to vehicles on 1st May 2017. Depreciation charged
on vehicles @ 10 % on straight line Method
4. Firm had abnormal gain of 10,000 during the year.
ended 31 March 2019
5. During the year ended 31 March 2019, a machine got
destroyed in accident & 30,000 was written off as loss in
Profit & Loss Account. Value of goodwill ?
(a) 6,40,000
(b) 1,60,000
(c) 4,80,000
(d) 3,20,000

17. The average net profits expected of a firm is future

are 88000 per years and capital invested in the business
by the firm is 3,50,000. The rate of interest expected from
capital invested in this class of business is 12%. The
renumeration of the partners is estimated to be 18,000
for the year. Calculate the value of goodwill on the basis of
two years purchase of super profits. Value of goodwill ?
(a)70,000
(b) 42,000
(c) 28,000
(d) 56,000

18. Average profit earned by a firm is 75,000 which

includes undervaluation of stock of 5000 on average
basis. The capital invested in the business is 8,00,000 &
the normal rate of return is 8 %. Calculate goodwill of the
firm on the basis of 3 times the Super Profit. Value of
goodwill ?
(a) 80,000
(b) 64,000
(c) 16,000
(d) 48,000

19. Average Profit of the firm is 1, 50, 000. Total tangible assets in
the firm are 12,00,000 & outside liabilities are ` 7,00,000. In the
same type of business, the normal rate of return is 20 %. Calculate
the value of goodwill of the firm by Capitalisation of Super Profit
method . Value of goodwill ?
(a) 5,00,000
(b) 1,00,000
(c) 50,000
(d) 2,50,000

20. The excess amount which the firm can get on selling
its assets over and a above the saleable value ot its assets
is called.
(a) Surplus
(b) Reserve
(c) Super Profits
(d) Goodwill

21. Which of the following is not true in relation to

Goodwill-
(a) It is an Intangible Asset
(b) It is a Factious Asset
(c) It has a realisable value
(d) All of these
Answer- (b) It is a Factious Asset
22. As per Accounting Standard(AS ) 26 Goodwill will be
recorded in the books of accounts-
(a) Purchased Goodwill
(b) Self generated Goodwill
(c) Purchased Goodwill and Self generated Goodwill
(d) None of these

23. Super profit means-

(a) More than normal profit
(b) Less than normal profit
(c) Average profit+Normal Profit
(d) None of these

24. Methods of valuation of Goodwill –

(a) Average profit Method and Weighted average profit method
(b) Super profit Method
(c) Capitalisation of Average profit Method and Capitalisation of
Super profit Method
(d) Annuity Method
(e) All of these

25. A firm earns a profit of 26,000 and has invested

capital amounting to 2,20,000. In the same business
normal rate of earning profit is 10%. Calculate the value of
goodwill with the help of Capitalisation of super profit
method. Value of goodwill ?
(a) 26,000
(b) 4,000
(c) 40,000
(d) 2,60,000

26. The capital invested in a firm is 4,60,000 and the rate

of return in the similar business
is 10%. The firm earns the following profit in the last 4
years:
2018 – 70,000
2019 – 90,000
2020 – 80,000
2021 – 1,00,000
Calculate the value of goodwill by Capitalisation method.
Value of goodwill ?
(a) 85,000
(b) 39,000
(c) 3,90,000
(d) 3,40,000

27. The capital invested in a firm is 4,60,000 and the rate

of return in the similar business
is 10%. The firm earns the following profit in the last 4
years:
2018 – 70,000
2019 – 90,000
2020 – 80,000
2021 – 1,00,000
Calculate the value of goodwill by Capitalisation method.
Value of goodwill ?
(a) 85,000
(b) 39,000
(c) 3,90,000
(d) 3,40,000

28. Capital employed ?

(a) Total assets – Liabilities
(b) Total assets =Liabilities
(c) Total assets +Capital
(d) Total assets(Excluding goodwill) – Liabilities

29. “Goodwill is a thing very easy to describe, very difficult

to define. It is the benefit and advantage of good name,
reputation and connection of a business. It is the
attractive force which brings in customers. It is one thing
which distinguishes an old established business from a
new business at its start.” definition ginen by…
(a) Lord Macraughton
(b) Lord Eldon
(c) Lord s.l paul
(d) Lord d.pola

30.Why is goodwill considered to be an intangible asset

and not a fictitious asset? because of
(a) Goodwill can be realized
(b) Goodwill can be sold
(c) Goodwill has value
(d) All of these