Multiple Cholce Questions MCQ) ) : Brand Value
Multiple Cholce Questions MCQ) ) : Brand Value
MCQ.22
2.GOODWILL: NATURE
AND VALUATION
Building Machinery.
Vehicle.
Goodwill
3. ldentify the correct statement of the following:
is a current asset.
Goodwill
Goodwil is afictitious asset. Goodwll is an intangible asset.
Goodwill is a wasting aset.
Excess amount that a fim gets over and above the net assets at the time of sale of business is
Profits are not similar over the years and are fluctuating
Profits show a rising or falling trend.
Profits are higher in one year and lower in another.
Profits are similar In all the years.
7. Following factors affect the value of goodwill except
Nature of Business. The form of business entity.
Technical Know-how. Efficiency of Management.
8. Goodwill s valued at the time of
11. Raj & Associates is a partnership firm. It Intends to value Its Goodwill. Average profit for the past 5 years
is1,50,000, and Goocwill ls being valued at 3 years' purchase of average profit, value of Goodwill of the
firm will be
R4,50,000. 1,50,000.
3,00,000. 6,00,00o.
12. Mona, Reena and Sona are carrylng on business in partnership. Goodwill of the firm is to be valued at
years' purchase of average profits of last 5 years. Profit of last 5 years are given below:
Year 1
Year 22 Year
3 Year 4
Year 5
16,000
15,000 B,000) 7,000 10,000
Goodwill of the fim willbe
O24,000.
33,60o.
30,000. None of these.
13. Following were the profits of a firm for the last 3 years:
Tear Profit ()
2019-20 3,00,000 (including abnormal gain of 90,000)
2020-21 2,40,000 (after charging abnormal loss of 1,20,000)
2021-22 3,60,000 (excluding ? 1,20,000 payable on the insurance of machinery)
Goodwill of the firm on the basis of 4 years' purchase of the average profit for the last 3 years will be
12.00,00. 10,80,000.
12,80,00. None of these.
14. Super Profit means
Average Profit - Normal Profit.
OWeighted Profit + Number
of Weights.
Total Profit
Number of Years. None ofthese.
15. Capital employed by a partnership firm isR5,00,000. Its average profit is
in similar type of business is 10%. The amount of Profit Is
60,000. The normal rate of retur
Super
50,000. 10,00o.
6,000.
s6,00.
16. Under Super Profit Method, goodwill is calculated by
Number of years' Purchase x Average Profit. O Number of years' Purchase x Super Profit.
Super Profit + Normal Rate of Return. Super Profit Normal Profit.
17. Average profit of a business over the last five years is 60,000. Normal yield on capital invested in sucha
business is3 estimated at 10% p.a. Capital Invested in the business ls? 5,00,000. Amount of goodwil, f it is
based on years' purchase of last 5 years super profits will be
O 1,00,000. 1,80,000.
O 30,000. 1,50,000.
18. Net Profits during the last three years of a firm are:
Year
Profit ( 18,000 20,000 22.000
of firm is 60,000. Normal Rate of Return is 109%. Value the basis of
Capital investment the
three years' purchase of the Super Profit for the last three years will be
of Goodwill on
O 21,000. 42,000.
84,000. 20,000
19. M/s.Supertech India has assets of 5,00,000, whereas Liabilities are: PartnersCapitals-3,50,000, General
Reserve 60,000 and Sundry Creditors-90,000. If Normal Rate of Return is 10% and Goodwill of the
firm is valued at t 90,000 at 2 years purchase of Super Profit, the Average Profit of the fim will be
46,000. 86,000.
1,63,00 23,00o.
20. Average Capltal Employed of a fim isR4,00,000 and the Nomal Rate of Retum is 15%. Average profit of
the firm ls 80,000 per annum. If management cost is estimated at ? 10,000 per annum, then on the basis
of two years' purchase of Super Profit, value of Goodwill will be
10,000. 20,000.
O60,000. 80.000.
21. Net assets of a fim including fictitious assets of 5.000 are 85,000. Net liabilities of the fim are
30.000. Normal Rate of Returnis 10% and the Average Profit of the firm is 8,000. Value of goodwill as
per Capltalisatlon of Super Profit Method will be
20,000. 30,000
25,000. 15,000.
22. Total Capital employed in the firm is R 8.00,000, Normal Rate of Return is 15% and profit for the year is
1,20,000. Value of goodwill as per Capitalisation Method would bee
8,20,000 1,20,0o.
NIL 4,20,00.
23. Afirm eans profit of 1,10.000. Normal Rate of Return is 109%. Assets of the fim areT 1,.00,00 and
liabilities 1,00,000. Value of goodwill by Capitalisation of Average Profit will be
200,000. 10,000.
5,000. 100,000.
24. A firm earned 60,000 as profit, the normal rate of return being 10%. Assets of the firm are 7,20,000
(excluding goodwil) and LIabilties are R 240,000. Find the value of Goodwill by Capitalisation of Average
Profit Method.
O 2,40,000 R1,80,000
1,20,000 60,000
25, Tanglble Assets of the firm are 14,00.000 and outside liabilities are 7 40.000. Proft of the fim is
1,50.000 and normal rate of return is 10%. The amount of capitalemployed will be
O 10,00,000 1,00,000
O50,000 20,000 (CBSE 2020)
Partners' CapitalAccount
-Credit(tfbalance in Current Account + Free Reserves +Credit 8alance of
Profit
OutsideandLiabilities.
Loss any) Goodwill Non-Trade investments Fictlous Assets A l
- -
Partners Capital +Credit Balance in Current Accounts (or- Debit balance of Current Accounts)
* Free Reserves +Credit Balance of Profit and Loss Account (if any) Goodwill Non-Trade
Investments - Fictious Assets.
30. Information:
Capital Accounts of Partners Naresh and Vikesh- 500,000 each; Balances In Current Accounts of
Naresh and Vikesh- 50,000 and 40,000 respectively: Bank Loan- 10,00,000; Goodwill ?50,000;
Investments- 25,000; Advertisement Suspense- 15.000.
8ased on the above information, Capital Employed for the purposes of valuation of Goodwill will be
10,75,000.
10,90,0oo.
10,00,000. 10,40,000
1685,000. 15,85.000.
17,85,000. 14,85000.
32. In valuation of Goodwill Average profit is determined considering
Actual business profit for each year
It for abnormal profits and losses, if any.
O Actual business profit for each year adjustlng
A c t u a l business profit for each year adjustlng It for abnormal losses, if any.
Actual business profit for each year adjusting it for abnormal profits, if any.
Both Assertion (A) and Reason (R) are corect and Reason (R) is the corect explanation of Assertion (AV
Assertion (A) is correct but the Reason (R) Is not corect.
Both Assertion (A) and Reason () incorrect. are
3. Assertion (A:
Self-generated Goodwll s recognised in the books of account on reconstitution of a frm
because amount is exchanged between the gaining partner or partners and sacrificing
partner or partners.
Reason (R: According to AS 26, Intangible Assets, Self-generated Goodwill s not recognised in the books
accounts because the value Is not paid for it.
context of above two statements, which of the following is correct?
inthe and Reason
Assertion
Assertion A)
A). ( are correct but the Reason (R) Is not the correct explanation of
Both Assertion (A) and Reason ( are comect and Reason () Is the corect explanation of Assertion (A
Both Assertion (A) and Reason (R) are not correct.
Assertion (A) is not correct but the Reason (R) is correct.
Muitiple Choice Questions MCQ.27
4 Assertion A: Valuation of Goodwll Is necessary at the time of fims reconstitution because gaining
partners have to compensate the sacrificing partners for gaining profit share.
eason (RE Goodwill is an Intangible asset whlch Is recognised In the books of account if an amount is
paid for
In the context
of above two statements, which of the following s correct
ASsertion (A) and Reason (R) are correct but the Reason (R) s not the correct explanation o
Assertion (A).
Both Assertlon (A) and Reason (R) are correct and Reason (R) s the correct explanation of Assertion (A).
OAssertion (A) is correct but the Reason (R) Is not correct.
Both Assertion (A) and Reason (R) are incorrect.
5. Assertion (A: Goodwll is
Intanglble asset and is recognlsed as an asset only when consideration has
an
8. Assertlon ( : Goodwil by Average Profit Method Is calculated by ascertaining average profit earned
by the firm which Is deducted from expected return on capital employed. The profit so
determined Is multiplled by the number of years purchase
Reason (R The value of Goodwll by Super Profts Method is calculated by ascertalning average profit
earned by the firm which Is deducted from expected return on capital employed. The profit
determined ls multipled by the number of years purchase.
so
Both, Assertion (A) and Reason (R) are corect and Reason (R) Ls the correct
explanation of Assertion (A).
Assertion (A) is corect but the Reason (R) Is not correct.
Both Assertion (A) and Reason (R) are incorrect.
11. Assertion (A): Value
of Goodwill
calculated on Average Profit Method or Super Profit Method is same.
Reason (R: Value of Goodwill on Profit Method and
Average
basis of valuation Is different Super Profit Method cannot be same as the
In the context
of above two statements, which of the folowing Is correct?
Assertion (A) and Reason (R) are correct but the Reason (R) Is not the correct
Assertion (A). explanation of
6 Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct
explanatlon of Assertion (A).
Both Assertion (A) and Reason (R) are not correct
Assertion (A) is not correct but the Reason (R) is correct.
Multiple Cholce Questions
MCQ29
12.
Assertion (A}i Average Business Profit of a irm s t5,00,o00. Capital employed in the busines5 5
S00,000. " Normal rate of Return is
8%, Super Profit wll be 100000,
Neason
(R Super Profit ls the excess of Average Proflts over the Normal Prafits. Capltal employed s
50,00.000 and 8% Is the expected return, expected norrnal profit will be 4,00,000. SinGE
normal proflt s 5,00,000,
In
Super Proft will be 1,00,000.
the context of obove two
statements, whlch of the following Is correct
Assertion (A) and Reason (R) are correct but the Reason (R) Is not the correct explanation or
Assertion [A).
OBoth, Assertlon (A) and Reason (R) are correct and Reason (R) s the correct
explanation of Assertion A.
OAssertion (A) is correct but the Reason (R) s not
correct.
Both Assertion A) and Reason (R) are Incorrect.
13. Assertlon (A): If the
value of Goodwll valued at 3 years purchase of Average Super Profit is? 3,00,000 and
Rate of Return Is 7% of
Capital Employed, Capital Employed will be t 20,00,000.
profit will be t 240,000. Average
Reason (R):
Capltal employed
Is ? 50,00,000 and 8%ls the
expected return on capital employed,
normal profit will be t 400000.The
value will of Goodwill be expected
t22,50,000, average profit being
more than the
expected return on capltal employed.
In the context of obove two
statements, which of the following s correct?
O Assertion (A) and Reason (R) are correct but the Reason (R) Is not the correct
Assertlon A). explanatlon of
Both, Assertion A) and Reason (R) are corect and Reason (R) ls the correct
explanatlon of Assertion A).
O Assertion (A) is correct but the Reason
(R) is not correct.
Both Assertlon (A) and Reason (R) are Incorrect.
14. Assertion (A):
Capltal Employed in aflrmisR and rate of
50,000. Asaresult, Goodwill 5,00.000 return is 109%. Average
valued at 3 years purchase profit
of the firm s
of Super Profit will be nil whereas
value of Goodwill at three
years purchase of Average
Profit will be ?
1,50,000.
Reason (R):
Super profitis of the firm ls nil
because average profit s7 50,000 and
expected
empioyed 50,000. Since both return capital on
average
super profit is nil. Thus, value of Goodwill profit and Return on Capital Employed Is same,
3
by Super Profit Method ls nil. Value of Goodwill at
years purchase of average profit will be ? 1,50,00(E 50,000 x 3).
In the context
of above two statements, whlch of the following ls correct?
O Assertion (A) and Reason (R) are correct but the
Reason (A) is not the correct
Assertion A). explanatlon of
OBoth, Assertion A) and Reason (R) are correct and Reason (R) is the correct
OAssertion (A) is correct but the Reason (R) Is not correct. explanation of Assertlon A
Both Assertlon (A) and Reason (R) are Incorrect.
15. Assertlon AJ:
Capital Employed In fim ls5,00.000
a
70,000. As a result, and rate of
return is 109%. Average profit of the firm is
Goodwll valued
Whereas value of Goodwll at three
at 3
years purchase of Super Profit wll be 60,000.
years purchase of Average Proflt wll be R 2,10,000.
Reason (R): Super
profltof the firm s
t60,000 because average proft is 70,000, which exceeds expected
return byt 20,000. Value of Goodwill at 3 years
purchase of average profit wll also be R 60,000
( 20,000x 3).
in the context of above two statements, which of the following is correct?
Assertlon (A) and Reason (R)
Assertion (A)
are correct but the Reason (R) 1s not the correct
explanation of
Both, Assertlon (A) and Reason (R) are correct and Reason (R) ls the correct
explanatlon of Assertion (A).
Assertlon (A) Is correct but the Reason (R) Is not correct.
Both Assertlon (A) and Reason (R) are
Incorrect.
ASsertion A.
Both, Assertion (A) and Reason (R) are comect and Reason (R) is the corect explanation of Assertion (A).
Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
Assertlon (AA
Assertlon (A) is correct but the Reason (R) Is not correct.
Both Assertion (A) and Reason (R) are incorrect.
Multiple Choice Questions MCQ.31
20. Assertlon (A}:
Net assets of
a firm after
deducting Advertisement Suspense of 50,000are 1000.000.
Outside Liabilities of the firm are t 3,00,0oo. Normal Rate of Return Is 106 and average
profit of the
fim s t Value of Goodwill as
70,000. Capitalisation of Super Profit 5
per
1,00,000.
Reason (R: Capital employed ist 7.00,000 (« 10,00.000- 3,00.00). Normal Profitis 70,.0007.00.000
*095. Actual Average Profit is 70,000. Thus, Super Profit is TNil. Capitalised it at 10%, valuee
of Goodwill comes to t Nil
In the context of above two
statements, whlch of the following Is correct?
Both Asertion( and Reason (M are coiect and Resson (s the corect explarationof Assertion A
Assertion (A) and Reason (R) are correct but the Reason (R) Is not the correct explanation of
Assertion (A).
Assertion (A) is not correct but Reason (R) is correct.
Both Assertion (A) and Reason (R) are incorrect.
On the basis of above information, choose the correct option to the questions.
O 15,.000. 25,000.
30,000. 20,000.
(i) Average Super Profit will be
15,000. 25,00o.
O 24,000. 20,000.
(i) Average Profit will be
O 50,00o. 52,00o.
60,000.
54,000.
(w) Raman will compensate Amit and Aman by paying Goodwill
8,400 each. 7,400 each.
6,400 each. 5A00 each.
3. Shiv and Mohan are partners for the past 10 years. Due to external factors, ie, pandemic business got
severely affected. Markets being closed and customers not coming to the outlet and also internal factor,
le, partners being not willing to invest further capital, the declsion being affected by uncertain conditions
of pandemic, business has been showing downward trend since last 2 years and net profits or loses in the
last 3years areas follows
2018- 2019-20 2020-21
425,000 1.50.000 125,000(Loss)
They are considering of admitting a partner who can bring capital to meet the funds shortage. They
discussed with Radhe to bea partner who agreed but was of the opinlon that he should not be paying
ary goodwill to get the share. However.Shiv and Mohan were of the opinion that they should get goodwill
since they will be sacrificing their proft share. Thus, they declded to value goodwill by Capitalisation of
Super Profit. Average capital employed in the business is 5,00,000. The rate of return expected from
capital invested is 159%. Management cost ls estimated at 5,000 per month.
On the basis of above information, choose the correct option to the glven questions.
0Goodwill at 3 years purchase of Average Proft will be
1.35,000. 2,70,000.
540,00. 6,00,000.
G) Goodwill at 3 years purchase of Super Profit will be
45,00o. 90,00o.
30,000. 60,000.
(i) Goodwill under Capitalisation of Super Ptoft will be
1,50.000. 2,00,000.
1,00,00. 50,000.
ANSWERS
Multlple CholceQuestions(MCQs))
(b) 3. (d) 4. (d)
(a) 6. (b) 7. b) 8.
14. (a)
15. (b)
Working Note:
Super Profit = Average Profit Normal Profit
T60,000-7 50,000 ie, 109% of 5,00,00) = T 10,000.
16. (b)
17.
Working Note:
={
Super Profit 60,000- 50,000 =? 10,000
Goodwill = 10,000x 3 =7 30,000.
18. (b)
Working Note:
Average Profit= 18,000+20,000+T22,009T 20,000;
Super Profit =
Average Profit -
Normal Profit
20,000- 6,000 = 7 14,00
Goodwill = 7 14,000 (Super Profit) x 3 =42,000.
19. (b)
Working Note:
4,10,000
Capital Employed = 3,50,000+60,000
?
74,10,000 41,000
Normal Profit= 10% of
Goodwill 7 90,000
Super Profit =
2
= 745,000
Profit
Average Profit =
Normal Profit Super
+
ed with CamScanner
An Ald to Accountancy-CBSE XII
MCQ.34
20. (b)
Worklng Note:
Super Proft = (? 80,000 7 10,000)-7 60,000={ 10,000
Goodwill = 7 10,000 x 2 = ? 20,000.
21. (b)
Workling Note:
Capltal Employed = t85,000-T 5,000-7 30,000- 50.00
Normal Profit 50,000x 5,000
1,10000 x 11.00.000.
Goodwill Capitalised Value Net Assets (ie., Asset-LIlabilities)
=11,00,000-7 10,00,000 =R 1,00,000.
24. ()
Working Note
Capitalised Value = R60,000x 6,00,000.
Goodwill = 7 6,00,000-T 480,000 7,20,000- 2,40,000)= 1,20,000.
25. a)
Worklng Note:
Capltalised Employed = 14,00,000- 4,00,000 10,00,000.
6. (a)
Working Note:
Super Profit = Average Profit - Normal Proft
=
7 2,00,000 x =
10,00,000.
20
Multiple Choice Questions
MCQ35
27.
Worklng Note:
Caplitalised Value 7 90,000 x
00
9,00,000
Goodwill= Capltallsed
Value Net Assets
-T
9,00,000 ( 2,00,000+ 240,000+7 50,000- 10,000)
=
9,00,000 4,80,000 4,20,000.
28. (6)
29. d)
30. (
Working Note:
() Capital Employed =
Fictitlous Assets.
GD5,00,000+5,00,000+ 50,000+ 40,000- 50,000 25,000
31. (d) 15,000= 1000.000.
Working Note:
) Capital Employed =
Total Assets Debit
Balances of Current Accounts Bank
Fictitious Assets (Profit and Loss Loan Godwill
Gi) R Account (Debit).
25,00,000 75,000 25,000 8,00,000
32 (b) 1,00,000 15,000= 1485,000.