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.
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
Answer- (a) Weighted Average profit = Total products of profit / Total of weights
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
Answer- (b) 13,20,000
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
Answer- (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
Answer- (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
Answer- (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
Answer- (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
Answer- (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
Answer- (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
Answer- (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
Answer- (d) Goodwill
