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P, Q, and R are partners sharing profits and losses in the ratio of 2 : 2 : 1. They admit 5 for 1/5th share. For the purpose of admission of 5, the goodwill of the firm is to be valued at 3 years’ purchase of the average of 5 years’ profit or loss. The profits (Loss) are:

Ans – c) Solution:-

Anurag Pathak
April 19, 2023

Under the average profit method of goodwill valuation, the value of goodwill is determined by

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

Anurag Pathak
April 18, 2023

Under the Capitalisation of Super Profit basis of goodwill valuation, goodwill is calculated by

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

Anurag Pathak
April 18, 2023

Which of the following factors affects the value of goodwill?

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

Anurag Pathak
April 18, 2023

Which of the following is not true in relation to 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.

Anurag Pathak
April 18, 2023

Goodwill is not accounted in the books if

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

Anurag Pathak
April 18, 2023

Assertion (A): Goodwill is an intangible asset and is recognised as an asset only when consideration is paid for it.

Ans – b) Explanation:- Goodwill is an intangible asset and is recognised as an asset only when consideration is paid for it as per AS 26.

Anurag Pathak
April 18, 2023

Assertion (A): Goodwill is valued at the time of the firm’s reconstitution because gaining partners have to compensate the sacrificing partners for gaining profit share.

Ans – a) Explanation:- Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A)

Anurag Pathak
April 18, 2023

Assertion (A): Self-generated Goodwill is recognised in the books of account on reconstitution of a firm because the amount is exchanged between the gaining partner or partners and sacrificing partner or partners.

Ans – d) Solution:- Self-generated Goodwill is not recognised in the books and not recorded because the value is not paid for it. Thus, Assertion (A) is not correct but the Reason (R) is correct.

Anurag Pathak
April 18, 2023

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

Ans – b) Explanation:- Goodwill is an intangible asset and does not have any physical existence. Goodwill is the reputation that a business enjoys as a result of its good service and product. The customers prefer and also recommend to…

Anurag Pathak
April 18, 2023

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