Goodwill MCQ

What Is Goodwill :- Goodwill is also known as an intangible asset linked with the acquisition of one business by another. Goodwill is a condition where the purchase payment is higher than the worth of all the intangible and solid visible assets acquired in the possession.

The worth of a firm’s solid customer base, good customer relations, brand name, patents or proprietary technology, and good employee relations are some examples of goodwill.

1. Goodwill can be classified into:

(a) Purchased Goodwill

(b) Self generated Goodwill

(c) A and B

(d) None of these

Answer- (c) A and B

2. Goodwill is an:

(a) Tangible Assets

(b) Intangible Assets

(c) Current Assets

(d) Fictious Assets

Answer- (b) Intangible 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.

Answer- (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

Answer- (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

Answer- (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.

Answer- (a) Number of years’ purchase means for how many years the firms will earn the same  amount of profit because of the past efforts.

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

Answer- (a) Average profit =Total Normal profits/ Number of years

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

Answer- (a) 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

Answer- (a)  Normal profit =Capital employed × 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)

Answer- (a) Goodwill =(Super profit×100)/(Normal Rate of return)