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Solution:- Self-generated Goodwill (Non-Purchased Goodwill):- Self-generated goodwill is internally generated goodwill that arises from a number of factors 9such as favourable location, efficient management, good quality of products, etc.) that a running business possesses due to which it is able…

Solution:- Purchased Goodwill:- Purchased Goodwill is that goodwill for which the firm has paid consideration in cash or kind. For example, when a business is purchased and purchase consideration is more than the value of net assets (i.e., Assets –…

Solution:- The two features of goodwill are: It is an intangible asset, i.e., it does not have a physical existence and has a value, Thus, it is not a fictitious asset. It does not have an existence separate from that…

Solution:- The need for valuation of goodwill arises: When there is a change in the profit-sharing ratio. When a partnership firm is sold as a going concern. when two or more firms amalgamate.

1st Definition “Goodwill may be said to be that element arising from the reputation, connections, or other advantages possessed by a business which enables it to earn greater profits than the returns normally to be expected on capital represented by…

Solution:- Capital Employed = Assets – Liabilities Capital Employed = 15,00,000 – 12,00,000 = ₹ 3,00,000 Normal Profit = 3,00,000 × 10% = ₹ 30,000 Goodwill = ₹ 18,000 Goodwill = Super Profit × 4 year’s purchase Super Profit =…

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.