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#### Goodwill In Partnership Accounts Important Questions

12th Standard EM

Reg.No. :
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Accountancy

Time : 01:00:00 Hrs
Total Marks : 50
5 x 1 = 5
1. Identify the incorrect pair

(a)

Goodwill under Average profit method - Average profit × Number of years of purchase

(b)

Goodwill under Super profit method - Super profit × Number of years of purchase

(c)

Goodwill under Annuity method - Average profit × Present value annuity factor

(d)

Goodwill under Weighted average profit method - Weighted average profit × Number of years of purchase

2. When the average profit is Rs.25,000 and the normal profit is Rs.15,000, super profit is

(a)

Rs.25,000

(b)

Rs.5,000

(c)

Rs.10,000

(d)

Rs.15,000

3. The total capitalised value of a business is Rs.1,00,000; assets are Rs.1,50,000 and liabilities are Rs.80,000. The value of goodwill as per the capitalisation method will be

(a)

Rs.40,000

(b)

Rs.70,000

(c)

Rs.1,00,000

(d)

Rs.30,000

4. Which is the present value of a firm's future excess earnings?

(a)

Fixed asset

(b)

Current assets

(c)

Good will

(d)

None of these

5. Goodwill is shown under fixed assets in the

(a)

Trial balance

(b)

Balance sheet

(c)

(d)

Profit and loss account

6. 6 x 2 = 12
7. A partnership firm has decided to value its goodwill for the purpose of settling a retiring partner. The profits of that firm for the last four years were as follows:
2015: Rs.40,000; 2016: Rs.50,000; 2017: Rs.48,000 and 2018: Rs.46,000
The business was looked after by a partner. No remuneration was paid to him. The fair remuneration of the partner valued at comes to Rs.6,000 per annum.
Find out the value of goodwill, if it is valued on the basis of three years purchase of the average profits of the last four years

8. From the following information relating to Arul enterprises, calculate the value of goodwill on the basis of 2 years purchase of the average profits of 3 years.
(a) Profits for the years ending 31st December 2016, 2017 and 2018 were Rs.46,000, Rs.44,000 and Rs.50,000 respectively.
(b) A non-recurring income of Rs.5,000 is included in the profits of the year 2016.
(c) The closing stock of the year 2017 was overvalued by Rs.10,000.

9. What is goodwill?

10. Why is goodwill considered as an intangible asset but not a fictitious assets?

11. How does the factor's 'quality of product' affect the goodwill of a firm?

12. How does the 'market situation' affect the value of goodwill of a firm?

13. 6 x 3 = 18
14. For the purpose of admitting a new partner, a firm has decided to value its goodwill at 3 years purchase of the average profit of the last 4 years using weighted average method. Profits of the past 4 years and the respective weights are as follows:

Particulars 2015 2016 2017 2018
Profit (Rs.) 20,000 22,000 24,000 28,000
Weight 1 2 3 4

Compute the value of goodwill.

15. How is goodwill calculated under the super profits method?

16. How is the value of goodwill calculated under the capitalisation method?

17. Compute average profit from the following information.
2016: Rs.8,000; 2017: Rs.10,000; 2018: Rs.9,000

18. What is the need for valuation of goodwill?

19. Explain the classification of goodwill.

20. 3 x 5 = 15
21. From the following information, compute the value of goodwill by capitalising super profit:
(a) Capital employed is Rs.4,00,000
(b) Normal rate of return is 10%
(c) Profit for 2016: Rs.62,000; 2017: Rs.61,000 and 2018: Rs.63,000

22. From the following information relating to Arul enterprises, calculate the value of goodwill on the basis of 2 years purchase of the average profits of 3 years.
(a) Profits for the years ending 31st December 2016, 2017 and 201S were Rs. 23,000 Rs.22,000 and Rs. 25,000
respectively.
(b) A non - recurring income of Rs. 2,500 is included in the profits of the year 2016.
(c) The closing stock of the year 2017 was overvalued by Rs. 5,000.

23. For the purpose of admitting a new partner, a firm has decided to value its good will at 3 years purchase of the average profit of the last 4 years using weighted average method profits of the past 4 years and the respective weights are as follows.

 Year 2015 2016 2017 2018 Profit 40,000 44,000 48,000 56,000 Weight 1 2 3 4

Compute the value of goodwill