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Solution:- Average Profit for Valuation of Goodwil = ₹ 4,40,000 – ₹ 2,00,000 (Partner’s Remuneration) Average Profit for Valuation of Goodwill = ₹ 2,40,000 Normal Profit = Capital Employed × Normal Rate of Return Normal Profit = 8,00,000 × 15/100…

Solution:- Capital Employed = Total Assets (Excluding goodwill) – Total Outside’s liabilities Capital Employed = ₹ 27,50,000 – ₹ 7,00,000 = ₹ 20,50,000 Normal Profit = Capital Employed × Normal Rate of Return Normal Profit = 20,50,000 × 10% Normal…

Ans – a) Solution:- Total Capitalised Value of firm = Average Profit/Normal Rate of Return × 100 Total Capitalised Value of firm = 8,00,000 × 100/20 = ₹ 40,00,000

Ans – c) Explanation:- Goodwill is the present value of the expected super-profits of a firm. Thus Reason (R) is correct. The goodwill is not expected future profits above the super profits. Thus Assertion (A) is incorrect.

Ans – c) Solution:-

Ans – a) Explanation:- Goodwill = Average profit × no. of year’s purchase

Ans – d) Explanation:- Formula:- Super Profit/Rate of Return

Ans – d) Explanation:-  Favorable Location, Favourable Contracts, and Efficiency of Management affect the value of goodwill.

Ans – b) Goodwill is not a fictitious asset as it has a realisable value and help business to generate more profit with less effort.

Ans – b) Explanation:- As per the AS – 26, Self-generated goodwill is not recorded in the books as no consideration is paid against it.