Class 12 Acc CH-2- GOODWILL: NATURE AND VALUATION

CH-2- GOODWILL: NATURE AND VALUATION  

WORK SHEET 2

1. The term 'Number of Years' Purchase' means

A The number of years during which the purchaser of Goodwill expects that the profit due to goodwill are likely to arise in future.

B Number of years for which goodwill is purchased.

C Number of years for which goodwill purchased will not help the firm in earning similar profits.

D None of the above.

2 Total Capital employed in the firm is 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 be

A 8,20,000.

B 1,20,000.

C Nil

D 4,20,000

3 M/s. Supertech India has assets of 5,00,000, whereas Liabilities are: Partners Capitals-3.50,000 General Reserve 60,000 and Sundry Creditors- 90,000. If Normal Rate of Return is 10% and Goodwill of firm is valued at 90,000 at 2 years' purchase of Super Profit, the Average Profit of the firm will be

(a) 46,000

(b) 86,000.

(c) 1,63,000

(d) 23,000.

4 Information:

Capital Accounts of Partners Naresh and Vikesh- 5,00,000 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.

Based on the above information, Capital Employed for the purposes of valuation of Goodwill will be

(a) 10,90,000.

(b) 10,75,000.

(c) 10,00,000.

(d) 10,40,000.

5 Given below are two statements (in each question), one labelled as Assertion (A) and other labelled as Reason (R)

Assertion (A): Goodwill is an intangible asset because of which an enterprise is likely to earn higher profits without putting extra efforts.

Reason (R): Goodwill is an intangible asset as it exists but does not have a physical existence. Also, if an enterprise enjoys goodwill, it will have repeated customers and will also attract more customers due to which sales will increase and thus the profits.

In the context of above two statements, which of the following is correct?

A Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation Assertion (A).

B Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion 

C Both Assertion (A) and Reason (R) are not correct.

D Assertion (A) is not correct but the Reason (R) is correct