S.Y B.COM
SEMESTER - IV
CORPORATE ACCOUNTING
(CA)
MCQS
UNIT - III
CHAPTER = 1
VALUATION OF GOODWILL
1) Goodwill is .........
(A) An Intangible asset
(B) A fixed asset
(C) Realizable
(D) All of the above
2) Goodwill is to be valued when ...........
(A) Amalgamation takes place
(B) One company takes over another company
(C) A partner is admitted
(D) All of the above
3) Goodwill is paid for obtaining ...........
(A) Future benefit
(B) Present benefit
(C) Past benefit
(D) None of the above
4) Super profit is ............
(A) Excess of average profit over normal profit
(B) Extra profit earned
(C) Average profit earned by similar companies
(D) None of the above
5) Normal Profit is ..........
(A) Profit earned by similar companies in the industry
(B) Average profit earned
(C) (A) and (B)
(D) None of the above
6) Normal Profit depends on .........
(A) Average capital employed
(B) Normal Rate of Return
(C) (A) and (B)
(D) None of the above
7) Goodwill as per purchase of average profit method is equal to .........
(A) Average profit x Amount of purchase
(B) Average profit
(C) Average Profit x Number of years purchase
(D) All of the above
8) Goodwill as per purchase or super profit method is equal to ..........
(A) Super Profit x Amount of purchase
(B) Super Profit
(C) Super Profit x Number of year's purchase
(D) None of the above
9) Under capitalization of super profit method, Goodwill is equal to ...........
(A) Capitalized value of maintained profit
(B) Capitalized value of super profit at NRR
(C) (A) and (B)
(D) None of the above
10) Average profit is Rs.19,167 and normal profit is Rs.10,000. The Super Profit is .......
(A) Rs.10,000
(B) Rs.9,167
(C) Rs.29,167
(D) Rs.19,167
11) Super profit is Rs.9,167 and the normal Rate of Return is 10%. Goodwill as per capitalization of Super Profit method is equal to
(A) Rs.95,000
(B) Rs.67,910
(C) Rs.90,600
(D) Rs.91,670
12) Capital employed is Rs.50,000. Trading Profit amounted to Rs.12,200, Rs.15,000 and Rs.2,000 loss for 2016, 2017 and 2018 respectively. Rate of Interest is 8% and the rate of risk is 2%. Remuneration from alternative employment of the proprietor is Rs.3,600 p.a. Amount of Goodwill at 3 years purchase of Super Profit is ........
(A) Rs. 9,500
(B) Rs. 8,850
(C) Rs. 8,800
(D) Rs. 8,000
13) The company earns a net profit of Rs.24,000 with a capital of Rs.1,20,00. The NRR is 10%. Under capitalization of super profit, goodwill will be ........
(A) Rs.24,000
(B) Rs.12,000
(C) Rs.70,000
(D) Rs.1,20,000
14) Average capital employed Rs.14,00,000.
Net Profit 2011 2,50,000
2012 1,00,00 (loss)
2013 4,50,000
NRR 10%
Goodwill at 3 years' purchase of Super profit will be ........
(A) Rs.1,20,000
(B) Rs.90,000
(C) Rs.1,80,000
(D) Rs.1,50,000
15) Following are the factors affecting goodwill except:
(A) Efficiency of management
(B) Nature of business
(C) location of the customers
(D) Technical know how
16) Weighted average method of calculating goodwill should be followed when:
(A) Profits has increasing trend
(B) Profit are uneven
(C) Either B' or 'C
(D) Profit has decreasing trend
17) Under average profit basis goodwill is calculated by:
(A) No. of years purchased multiplied with average profits
(B) No. of years purchased multiplied with super profits
(C) Summation of the discounted value of expected future benefits
(D) Super profit divided with expected rate of return
18) Under super profit basis goodwill is calculated by:
(A) No. of years purchased multiplied will average profits.
(B) No. of years purchased multiplied with super profits.
(C) Summation of the discounted value of expected future benefits.
(D) Super profit dividend with expected rate of return.
19) Under annuity basis goodwill is calculated by:
(A) No. of years purchased multiplied with average profits
(B) No. of years purchased multiplied with super profits
(C) Summation of the discounted value of expected future benefits
(D) Super profit divided with expected rate of return.
20) Under capitalization basis goodwill is calculated by:
(A) No. of years purchased multiplied with average profits
(B) No. of years purchased multiplied with super profits
(C) Summation of the discounted value of expected future benefits.
(D) Super profit divided with expected rate of return.
(21) The profits and Losses or the last year are 2001-02. Losses Rs.10,000; 2015-16 Losses Rs.2,500; 2016-17 Profits Rs.98,000 & 2017-18 Profits Rs.76,000. The average capital employed in the business is Rs.2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs.1,000 per month. Calculate the value of goodwill on the basis of two years purchase of super profits based on the average of four year.
(A) Rs.9,000
(B) Rs.8,750
(C) Rs.8,500
(D) Rs.8,250
22) The profits of last five years are Rs.1,70,000; Rs.1,80,000; Rs.1,40,000; Rs.2,00,000 and Rs.1,60,000. Find the value of goodwill, if is calculated on average profits of last five years on the basis of three year's purchase.
(A) Rs.5,70,000
(B) Rs.5,10,000
(C) Rs.5,30,000
(D) Rs.1,70,000
23) The profits of the last three years are Rs.40,000; 2016-17 profits Rs.60,000 & 2017-18 profits Rs.66,500. The total liabilities of the firm are Rs.10,00,000 of which outsiderss liabilities Rs.5,42,500. The rate of interest expected from capital invested is 10%. The value of goodwill on capitalization basis of super profit:
(A) Rs.97,750
(B) Rs.97,500
(C) Rs.97,250
(D) Rs.97,000
24) The capital of B and D are Rs.90,000 and Rs.30,000 respectively with the profit sharing ratio 3:1. The new ratio, admissible after 1.4.2018 is 5:3. The goodwill is valued Rs.80,000 as on that date. Amount payable by a gaining partner to a scarifying partner is:
(A) D will pay to B Rs.10,000
(B) B will pay to D Rs.10,000
(C) D will pay to B Rs.80,000
(D) B will pay to D Rs.80,000
25) The profit for 2003-2004 are Rs.4,000; for 2016-2017 is Rs.52,200 and for 2017-2018 is Rs.62,400. Closing stock for 2016-2017 and 2017-2018 includes the defective items of Rs.4,400 and Rs.12,400 respectively which were considered as having market value Nil. The value of goodwill on average profit method is:
(A) Rs.34,600
(B) Rs.47,400
(C) Rs.27,400
(D) Rs.35,400
26) A, B and C are partners sharing profit and loss in the ratio 3:2:1. They decide to change their profit sharing ratio to 2:2:1. To give effect to this new profit sharing ratio they decide to value the goodwill at Rs.30,000. Pass the necessary journal entry if goodwill not appearing in the old balance sheet and should not appear in the new balance sheet.
(A)
B's Capital Account Dr. 2,000
C's Capital Account Dr. 1,000
To A's Capital Account 3,000
(B)
Goodwill Account Dr. 30,000
To B's Capital Account 15,000
To C's Capital Account 10,000
To A' Capital Account 5,000
(C)
A's Capital Account Dr. 12,000
B's Capital Account Dr. 12,000
C's Capital Account Dr. 6,000
To Goodwill Account 30,000
(D)
A's Capital Account Dr. 3,000
To B's Capital Account 2,000
To C's Capital Account 1,000
27) Total capital employed in the firm Rs.16,00,000
Reasonable Rate of Return 15%
Profit for the year Rs.24,00,000
The value of goodwill using capitalization method is:
(A) Rs.24,00,000
(B) Rs.1,44,00,000
(C) Rs.84,00,000
(D) Rs.1,64,00,000
28) The profit of last five years are Rs.85,000; Rs.90,000 and Rs.70,000; Rs.1,00,000 and Rs.80,000. find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.
(A) Rs.2,75,000
(B) Rs.2,85,000
(C) Rs.2,55,00
(D) Rs.2,25,000
29) The profits of last three years are Rs.42,000; Rs.39,000 and Rs.45,000. Find out the goodwill of two years purchase.
(A) Rs.42,000
(B) Rs.84,000
(C) Rs.1,26,000
(D) Rs.85,000
30) The capital of A and B sharing profits and losses equally are Rs.90,000 and Rs.30,000 respectively. They value the goodwill of the firm at Rs.84,000, which was not recorded in the books. If goodwill is to be raised now, by what amount each partner's capital account will be credited:
(A) Rs.42,000 and Rs.42,000
(B) Rs.21,000 and Rs.63,000
(C) Rs.63,000 and Rs.21,000
(D) None of the above
31) Find the goodwill of the firm using capitalization method from the following information:
Total capital Employed in the firm Rs.8,00,000
Rate of Return 15%
Profits for the year Rs.12,00,000
(A) Rs.12,00,000
(B) Rs.72,00,000
(C) Rs.42,00,000
(D) Rs.82,00,000
32) Under capitalization basis goodwill calculated by:
(A) No. of years purchased multiplied with average profits
(B) No. of years purchased multiplied with super profits
(C) Summation of the discounted multiplied with super profits
(D) Super profit divided with expected rate of return.
33) Firm has earned exceptionally high profits from a contract which will not be renewed. In such a case the profit from this will not be included in ..........
(A) Profit share of the partners
(B) Calculation of the goodwill
(C) Both
(D) None
34) The profit for 1998-99 are Rs.2,000; for 2016-2017 is Rs.26,100 and for 2017-18 is Rs.31,200. Closing stock for 2016-2017 and 2017-18 includes defective items of Rs.2,200 and Rs.6,200 respectively which were considered as having market value NIL.
Calculate goodwill on average profit method.
(A) Rs.17,300
(B) Rs.13,700
(C) Rs.17,700
(D) Rs.23,700
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