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This section includes 7 InterviewSolutions, each offering curated multiple-choice questions to sharpen your Current Affairs knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Varun and Kuber are partners in a business. Balance in Capital and Current Accounts on 31st March, 2019 were : `{:(,"Capital Account","Current Account"),("Varun"," Rs. 5,00,000"," Rs. 80,000"),("Kuber"," Rs. 3,50,000"," Rs. 20,000 (Dr.)"):}` Profits of the last five consecutive years ending 31st March were : 2015 Rs. 60,000, 2016 Loss Rs. 40,000, 2017 Rs. 1,30,000, 2018 Rs. 2,00,000 and 2019 Rs. 2,50,000. General Reserve appeared in the books at Rs. 50,000. If the normal rate of return is 10%, find the value of goodwill by Capitalisation of Average Profit Method. |
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Answer» Average Profits `= (60,000-40,000 + 1,30,000+2,00,000 + 2,50,000)/(5)=Rs. 1,20,000` Capitalised Value of Average Profits = Average Profit `xx(100)/("Normal Rate of Retuen")` `=1,20,000xx(100)/(10)=Rs. 12,00,000` Capital Employed = Capital Accounts + Current Accounts + General Reserve `= Rs. 5,00,000+Rs. 50,000 + Rs. 80,000 -Rs. 20,000 + Rs. 50,000` `= Rs. 9,60,000` Goodwill = Capitalised Value of Average Profits - Capital Employed `= Rs. 12,00,000 - Rs. 9,60,000 = Rs. 2,40,000. |
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| 2. |
From the figures given below, calculate goodwill according to the capitalisation of Average Profits Method : (i) Actual Average Profits = Rs. 72,000 (ii) Normal Rate of Return = 10% (iii) Assets = Rs. 9,70,000 (iv) Liabilities = Rs. 4,00,000 |
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Answer» Capitalised Value of Average Profits = Average Profits `xx (100)/("Normal Rate of Return")` `= 72,000 xx (100)/(10) =` Rs. 7,20,000 Capital Employed = Assets - Liabilities (i.e., Net Assets as on the date of Valuation of Goodwill) = Rs. 9,70,000 - Rs. 4,00,000 = Rs. 5,70,000. Goodwill = Capitalised Value of Average Profits - Net Assets = Rs. 7,20,000 - Rs. 5,70,000 = Rs. 1,50,000. |
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| 3. |
A, B and C are partners in a firm sharig profits and losses in the ratio of 3 : 2 : 1. They decide to take D into partnership for 1/4th share on 1st April, 2017. For this purpose, goodwill is to be valued at 3 times the average annual profits of the previous four or five years whichever is higher. The agreed profits for goodwill purpose of the past five years are as follows: `{:(,,"Rs,"),("Year ending on 31st March 2013",,"1,30,000"),("Year ending on 31st March 2014",,"1,20,000"),("Year ending on 31st March 2015",,"1,50,000"),("Year ending on 31st March 2016",,"1,10,000"),("Year ending on 31st March 2017",,"2,00,000"):}` Calculate the value of Goodwill. |
| Answer» Goodwill Rs. 4,35,000 | |
| 4. |
The goodwill of the firm is NOT affected by:A. Location of the firmB. Reputation of firmC. Better customer serviceD. None of the above |
| Answer» Correct Answer - D | |
| 5. |
The super profits of a firm are Rs. 14,000. If the normal rate of return is 7%, calculate the amount of goodwill by super profit capitalisation method. |
| Answer» Goodwill Rs. 2,00,000 | |
| 6. |
Capital invested in a firm is Rs. 3,00,000. Normal rate of return is 10%. Average profits of the firm are Rs. 41,000 (after an abnormal loss of Rs. 2,000). Calculate goodwill at five times the super profits. |
| Answer» Goodwill Rs. 65,000. | |
| 7. |
Capial employed by a partnership firm is Rs.5,00,000. Its average profit is Rs. 60,000. The normal rate of return in similar type of business is `10%.` What is the amount of super rofits?A. Rs 50,000B. Rs 10,000C. Rs 6,000D. Rs56,000 |
| Answer» Correct Answer - B | |
| 8. |
The average profits of a firm is Rs. 48,000. The total assets of the firm are Rs. 8,00,000 Value of other liabilities is Rs. 5,00,000. Average rate of return in the same business is 12 %. Calculate goodwill from capitalisation of average profits method. |
| Answer» Correct Answer - Rs. 1,00,000. | |
| 9. |
Which of the following is NOT true in relation to goodwill?A. It is an intagible assetB. It is fictitious assetC. It has a realisable valueD. None of the above |
| Answer» Correct Answer - B | |
| 10. |
A firm earns a profit of Rs. 37,000 per year. In the same business a 10% return is generally expected. The total assets of the firm are Rs. 4,00,000. The value of other liabilities is Rs. 90,000. Find out the value of goodwill. |
| Answer» Correct Answer - Goodwill Rs. 60,000 | |
| 11. |
A firm earn Rs 1,10,000. The normal rate of return is `10%.` The assets of the firm amounted to Rs 11,00,000 and liabilities to Rs1,00,000. Value of goodwill by capitalisation of Average Actual Profits will be,A. Rs 2,00,000B. Rs 10,000C. Rs 5,000D. Rs 1,00,000 |
| Answer» Correct Answer - C | |
| 12. |
The net assets of a firm including fictitious assets of Rs 5,000 are Rs 85,000. The net liabilities of the firm are Rs30,000. The normal rate of return is `10%` and the average profits of the firm are Rs8,000. Calculate the goodwill as per capitalisation of super profits.A. Rs 20,000B. Rs 30,000C. Rs 25,000D. None of these |
| Answer» Correct Answer - C | |
| 13. |
Sacrificing Ratio:A. New Ratio- Old RatioB. Old Ratio- New RatioC. Old Ratio- Gaining RatioD. Gaining Ratio-Old Ratio |
| Answer» Correct Answer - B | |
| 14. |
The excuess amount which the firm can get on selling its assets over and above the saleable value of its assets is called:A. SurplusB. Super profitsC. ReserveD. Goodwill |
| Answer» Correct Answer - D | |
| 15. |
X, Y and Z are partners sharing profits in the ratio of 5 : 4 : 1. It is now agreed that they will share future profits in the ratio of 3 : 3 : 4. Goodwill is valued at Rs. 1,00,000. You are required to pass a single journal entry for the treatment of goodwill. |
| Answer» Debit Z by Rs. 30,000 and Credit X and Y by Rs. 20,000 and Rs. 10,000 respectively. | |
| 16. |
A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. It is now agreed that they will share profits in the ratio of 5 : 4 : 3. Goodwill is valued at Rs. 1 ,20,000. Pass a single journal entry for the treatment of goodwill. |
| Answer» Debit B by Rs. 4,000 and C by Rs. 6,000, Credit A by Rs. 10,000. | |
| 17. |
Gaining Ratio:A. New Ratio-Sacrificing RatioB. Old Ratio-Sacrificing RatioC. new Ratio-Old RatioD. Old Ratio-New Ratio |
| Answer» Correct Answer - C | |
| 18. |
A, B and C are partner sharing profits in the ratio of `1:2:3.` On 1-4-2019 they decided to share the profits equally. On the date there was a credit balance of Rs 1,20,000 in their Profit and Loss Account and a balance of Rs 1,80,000 in General Reserve Account. Instead of closing the General R eserve Account and Profit and Loss Account, it is decided to record an adjustment entry for the same. In the necessary adjestment entry to give effect to the above arrangement,A. Dr. A by Rs 50,000, Cr. B by Rs50,000B. Cr.A by Rs 50,000, Dr. B by Rs 50 ,000C. Dr. A by Rs 50,000, Cr. C by Rs 50,000D. Cr. A by Rs 50,000, Dr. C by Rs50,000 |
| Answer» Correct Answer - C | |
| 19. |
A, B and C are partners sharing profits equally. From 1st April, 2017, they decided to share profits in the ratio of 3 : 4 : 5. On that date, Profit and Loss Account showed a credit balance of Rs. 90,000. Partners do not want to distribute the Profit and Loss Account balance but prefer to record the change by an adjustment entry. You are required to give the adjusting entry. |
| Answer» Debit C and Credit A by Rs. 7,500. | |
| 20. |
A, B and C are equal partners in the firm, It is now agreed that they will share the future profits in the ratio `5:3:2.` Sacrificing ratio and gaining ratio of different partners will be :A. A Sacrifice `(5)/(30),` B Gain `(1)/(30),` C Gain `(4)/(30)`B. A Gain `(5)/(30),` B Sacrifice `(4)/(30),` C Sacrifice `(1)/(30)`C. A Gain `(5)/(30),` B Sacridfice `(1)/(30),` C Sacrific e `(4)/(30)`D. A Sacrifice `(5)/(30),` B Gain `(4)/(30),` C Gain `(1)/(30)` |
| Answer» Correct Answer - C | |
| 21. |
P, Q and R were partners in a firm sharing profits in `5:3:2` ratio. They decided to share the future profits in `2:3:5.` For this purpose the goodwill of the firm was valued at Rs 1,20,000. In adjustment entry for the treatment of goodwill due to change in the profit sharing ratio.A. Cr. P by Rs 24,000, Dr. R by Rs 24,000B. Cr. P by Rs60,000, Dr. R by Rs60,000C. Cr. P by Rs36,000, Dr. R by Rs 36,000D. Dr. P by Rs36,000, Cr. R by Rs 36,000 |
| Answer» Correct Answer - D | |
| 22. |
A, B and C are partners in a firm sharing profits in the tatio of `3:4:1.` They decided to share profits equally w.e.f. 1st April, 2019. On that date the profit and Loss Accoutn showed the credint balance of Rs 96,000. Instead of closing the Profit and Loss Account, it was decided to record an adjustment entry reflecting the change in profit sharing ratio. In the journal entry :A. Dr. A by Rs 4,000, Dr. B by Rs 16,000, Cr . C by Rs20,000B. Cr. A by Rs 4,000, Cr. B by Rs 16,000, Dr. C by Rs 20,000C. Cr. A by Rs 16,000, Cr. B by Rs 4,000, Dr. C by Rs 20,000D. Dr. A by Rs 16,000, Dr. B by Rs 4,000, Cr. C by Rs 20,000 |
| Answer» Correct Answer - A | |
| 23. |
A and B share profits and losses in the ratio of `3:2` With effect from 1st january, 2019, they agreed to share profits equally. Sacrificing ratio and Gaining Ratio will be:A. Scaricice by `A(1)/(10),` Sacrifice by `B(1)/(10)`B. Gain by `A(1)/(10),` Gain by `B(1)/(10)`C. Scarifice by `A(1)/(10),` Gain by `B(1)/(10)`D. Gain by `A(1)/(10),` Sacrifice by `B(1)/(10)` |
| Answer» Correct Answer - C | |
| 24. |
A, B, C and D are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1 : 1. They decided to share future profits and losses in the ratio of 3 : 2 : 2 : 3. For this purpose goodwill of the firm valued at Rs. 1,50,000. There was also a reserve of Rs. 60,000 in the books of the firm. Find out sacrifice ratio and gaining ratio and pass necessary journal entry assuming that reserve is not to be disttibuted. |
| Answer» Debit C by Rs. 7,000 and D by Rs. 28,000, Credit A by Rs. 7,000 and B by Rs. 28,000. | |
| 25. |
P and Q were partners sharing profits and losses in the ratio of `3:2.` They decided that with effect from 1st january, 2019 they would share profits and losses in the ratio of `5:3.` Goodwill is valued at Rs 1,28,000. In adjustment entry:A. Cr. P by Rs 3,200,`" "`Dr. Q by Rs 3,200B. Cr. P by Rs 37,000,`" "` Dr. Q by Rs 37,000C. Dr. P by Rs 37,000,`" "` Cr.QbyRs 37,000D. Dr. P b y Rs 3,200`" "` Cr. Q by Rs 3,200 |
| Answer» Correct Answer - D | |
| 26. |
Why are 'Reserves & Surplus' distributed at the time of reconstitution on firm? |
| Answer» These belong to old partner. As such, these should be distributed among them. | |