GOODWILL: NATURE AND VALUATION

1.A BUSINESS WHEREIN DEMAND FOR THE PRODUCTS DEALT IN IS HIGHER THAN SUPPLY,IT WILL LEAD TO LOWER IN CAPITAL REQUIREMENT AND HIGHER PROFIT - WHICH FACTOR OF GOODWILL IS THIS

• PAST PERFORMANCE

• LONGER ESTABLISHMENT OF BUSINESS

• MARKET SITUATION

• FAVOURABLE LOCATION

2.EXCESS AMOUNT THAT A FIRM GETS OVER AND ABOVE THE MARKET VALUE OF ASSETS AT THE TIME OF SALE OF ITS BUSINESS IS

• RESERVE

• SUPER PROFIT

• GOODWILL

• PROFIT

3.AVERAGE CAPITAL EMPLOYED IN A FIRM IS RS 2,00,000. NORMAL RATE OF RETURN IN THE BUSINESS IS 20% AND THE FIRM'S ARE AVERAGE PROFITS ARE RS 1,60,000. VALUE OF THE GOODWILL BY CAPITALISATION OF SUPER PROFIT METHOD IS

• RS - 2,00,000

• RS - 4,00,000

• RS - 6,00,000

• RS - 8,00,000

4.UNDER SUPER PROFIT METHOD , GOODWILL IS CALCULATED BY:

• SUPER PROFT - NORMAL PROFIT

• SUPER PROFIT × NO OF YEAR'S OF PURCHASE

• AVERAGE PROFIT × SUPER PROFIT

• AVERAGE PROFIT × NO.OF YEAR'S OF PURCHASE

1. • 5.EXCESS OF PROFIT OVER WHAT IS CALLED SUPER PROFIT

• ACTUAL,SUPER

• SUPER,NORMAL

• SUPER ACTUAL

• ACTUAL,NORMAL

6.ASSERTION (A) : GOODWILL HAS A VALUE WHICH IS REALISED WHEN BUSINESS IS SOLD.

REASON (R) : GOODWILL IS A FICTITIOUS ASSET SINCE IT IS NORMALLY RELEASED ON SALE OF BUSINESS.

• ASSERTION AND REASON ARE CORRECT BUT REASON IS NOT THE CORRECT EXAMINATION OF ASSERTION

• ASSERTION(A) AND REASON(R) ARE CORRECT BUT REASON(R) IS THE CORRECT EXAMINATION OF ASSERTION(A)

• ASSERTION(A) IS FALSE AND REASON(R) IS TRUE

• ASSERTION(A) IS TRUE AND REASON(R)IS FALSE

7.WHAT KIND OF AN ACCOUNT IS A GOODWILL ACCOUNT?

• REAL A/C

• NOMINAL A/C

• PERSONAL A/C

• NOT AN A/C

8.TANGIBLE ASSETS OF THE FIRM ARE RS 14,00,000 AND OUTSIDE LIABILITIES ARE 4,00,000.PROFIT OF THE FIRM IS RS 1,50,000 AND NORMAL RATE OF RETURN IS 10%.THE AMOUNT OF CAPITAL EMPLOYED WILL BE

• RS 10,00,000

• RS 50,000

• RS 2,00,000

9.GOODWILL OF THE FIRM IS NOT AFFECTED BY THE:

• BETTER CUSTOMER SERVICE

• AFTER SALE SERVICES

• LOCATION OF THE FIRM

• ABNORMAL GAIN(NON RECURRING)

14. 10. IN WHICH OF THE FOLLOWING CASES,VALUATION OF GOODWILL IS NOT REQUIRED:

• PREPARATION OF FINAL ACCOUNTS

• SALE OF BUSINESS AS A GOING CONCERN

• CHANGE IN PSR

• DEATH OF A PARTNER