Class 12 Accountancy MCQs Valuation of Goodwill
Following are few MCQs for your practice. For a surprise factor, these are jumbled and not according to any particular method, level of difficulty or the format like theory /numerical.
Check the time taken for doing the questions in order to track your speed and accuracy, required for examination success.
Do these questions only after preparing the chapter.
- Assertion - Goodwill is an intangible asset.
Reason - Goodwill is the value of the reputation of a firm in respect of profits expected in future, over and above the normal profits. In the context of above two statements, which of the following is correct:
a) Assertion is correct but Reason is incorrect
b) Assertion is incorrect but Reason is correct
c) Both Assertion and Reason are correct
d) Both Assertion and Reason are incorrect
2. Anjana and Bandna are partners with capitals of ₹3,00,000 and ₹2,00,000 respectively. Normal rate of return is 15% and goodwill calculated at 2 years’ purchase of super profits is valued at ₹1,00,000. The average profits of the firm would be:
a) ₹25,000
b) ₹60,000
c) ₹1,75,000
d) ₹1,25,000
3. Average Profit of the firm is ₹6,00,000. Total tangible Assets in the firm are ₹25,00,000 and Outside Liabilities are ₹5,00,000. In the same type of business, the normal rate of return is 20% of the capital employed. The value of goodwill by Capitalisation of Super Profit Method would be:
a) ₹2,50,000
b) ₹5,00,000
c) ₹10,00,000
d) ₹15,00,000
4. A business earned average profit of ₹3,00,000 during the last few years. The normal rate of return in the similar business is 10%. The value of the tangible assets and liabilities of the business were ₹22,00,000 and ₹5,60,000 respectively. If the goodwill is valued 2.5 years’ purchase of super profit, the value of the goodwill of the firm would be:
a) Goodwill ₹2,40,000.
b) Goodwill ₹4,40,000.
c) Goodwill ₹3,40,000.
d) Goodwill ₹5,40,000
5. The average profits of the firm earned ₹60,000 including abnormal gain of ₹4,000. Firm had a fixed assets of ₹3,00,000 and Current assets of ₹60,000 and creditors ₹1,40,000. Calculate goodwill of the firm based on 3 years’ purchase of super profits if the normal rate of return is 10%.
a) Goodwill ₹69,000.
b) Goodwill ₹1,02,000.
c) Goodwill ₹1,80,000.
d) Goodwill ₹39,000.
6. The profits earned by a business over the last 5 years are as follows ₹12,000; ₹13,000; ₹14,000: ₹18,000 and ₹2,000 (loss). Based on 2 years’ purchase of the average of last 5 years’ profits, value of Goodwill would be:
a) ₹23,600
b) ₹22,000
c) ₹1,10,000
d) ₹1,18,000
7. A business has earned Super profit of ₹1,00,000 during the last few years and Normal rate of returns in 10%. The assets of the business amounted to ₹10,00,000 and Liabilities ₹1,80,000. The value of goodwill by Capitalization of Super Profits would be:
a) ₹54,000
b) ₹20,000
c) ₹36,000
d) ₹1,80,000
8. Calculate the value of goodwill at 3 years' purchase of Super Profit, when: Capital employed ₹2,50,000; Average profit ₹30,000 and normal rate of return is 10%.
a) ₹3000
b) ₹25,000
c) ₹30,000
d) ₹15,000
9. If super profit is zero or negative, there would be no Goodwill:
a) True
b) False
c) Partially true
d) Can’t say
10. The average profit over the last five years was ₹60,000. The normal yield on capital invested in such a business is estimated at 10% p.a. Capital invested in the business is ₹. 5,00,000. Amount of goodwill, if it is based on 3 years’ purchase of last 5 years’ super profit, would be:
a) ₹1,50,000
b) ₹1,80,000
c) ₹30,000
d) ₹1,00,000
Class 12 Accountancy MCQs Valuation of Goodwill
11. Assertion (A) - The value of Goodwill calculated on Average profit Method and Super profit Method is not the same.
Reason (R) - The value of Goodwill calculated on Average profit Method and Super profit Method is not the same as the basis of valuation is different.
a) Assertion(R) is true but the Reason(R) is false
b) Assertion(R) is false but the Reason(R) is true
c) Both Assertion(A) and Reason (R) are true and Reason(R) is the correct explanation of Assertion(A)
d) Both Assertion(A) and Reason (R) are true and Reason(R) is not the correct explanation of Assertion(A)
12. If Goodwill is ₹1,20,000, Average Profit is ₹60,000 Normal Rate of Return is 10% on Capital Employed ₹4,80,000. Capitalized Value of the firm would be:
a) ₹7,00,000
b) ₹5,00,000
c) ₹4,00,000
d) ₹6,00,000
13. Tangible Assets of the firm are ₹14,00,000 and Outside liabilities are ₹4,00,000, Profit of the firm is ₹1,50,000 and Normal Rate of Return is 10%. Capital Employed would be:
a) ₹10,00,000
b) ₹1,00,000
c) ₹50,000
d) ₹20,000
14. If Average Profit is ₹1, 60,000, Actual Capital Employed is ₹5,00,000. If rate of Normal Profit is 20%. What is the amount of Super Profit?
a) ₹10,000
b) ₹1,00,000
c) ₹60,000
d) ₹80,000
15. Which of the following items are added to previous year’s profits for finding normal profits for valuation of goodwill?
a) Loss on sale of fixed assets
b) Loss due to fire, earthquake etc
c) Undervaluation of closing stock
d) All of the above
16. The profits earned by a business over the last 5 years are as follows ₹12,000; ₹13,000; ₹14,000: ₹18,000 and ₹2,000 (loss). Based on 2 years purchase of the last 5 years profits, value of Goodwill will be:
a) ₹23,600
b) ₹22,000
c) ₹1,10,000
d) ₹1,18,000
17. The goodwill of a firm is valued at 3 years’ purchase of the average profits of last 3 years. The profits of the last three years were: First year: ₹4,00,000 (including an abnormal gain of ₹50,000), Second year: ₹5,00,000 (after charging an abnormal loss of ₹1,00,000), Third year: ₹2,50,000. The average profit for calculating Goodwill would be:
a) ₹2,00,000
b) ₹3,00,000
c) ₹4,00,000
d) ₹3,50,000
18. Followings are the profits of the firm for the last 3 years: First Year: ₹40,000 including profits on sale of a land ₹5,000, Second year: ₹50,000 including ₹10,000 loss on sale of Machinery, Third year: ₹45,000 excluding ₹5,000 payable for insurance premium. Average profits for computing the value of goodwill of the firm would be:
a) ₹30,000
b) ₹35,000
c) ₹40,000
d) ₹45,000
19. Weighted average profit method of calculating goodwill is used when:
a) Profits are not equal
b) Profits show a trend
c) Profits are fluctuating
d) None of the above
20. Value of Hidden Goodwill is calculated using:
a) Average Profit Method
b) Super Profit Method
c) Decision of the partners
d) Net worth of the firm
More questions will be added from time to time.
Class 12 Accountancy MCQs Valuation of Goodwill - Answers
- c) Both Assertion and Reason are correct
- d) ₹1,25,000
- c) ₹10,00,000
- c) Goodwill ₹3,40,000
- b) Goodwill ₹1,02,000
- b) ₹22,000
- d) ₹1,80,000
- d) ₹15,000
- a)Â True
- d) ₹1,00,000
- c) Both Assertion(A) and Reason (R) are true and Reason(R) is the correct explanation of Assertion(A)
- d)₹6,00,000
- a) ₹10,00,000
- c) ₹60,000
- d) All of the above
- c) ₹1,10,000
- c) ₹4,00,000
- d) ₹45,000
- b) Profits show a trend
- d) Net worth of the firm
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