Goodwill Questions

Which of the following statements are correct in respect of goodwill?(A) The present value of a firm's anticipated excess earnings.(B) The capitalised value attached to the differential profit capacity of a business.(C) Goodwill exists only when the firm earns super profits.(D) Any firm that earns normal profits or is incurring losses also has goodwill.Choose the correct answer from the options given below:

K, N and P are partners sharing profits and losses in the ratio of $4:3:2$. N retires and the goodwill is valued at Rs. $72,000$. K and P decided to share future profits and losses in the ratio of $5:3$. Identify the correct journal entry in this scenario.

Which of the following is NOT a method of valuation of goodwill?

The profit for the five years of a firm are as follows:YearProfit (Rs.)20134,00,00020143,98,00020154,50,00020164,45,00020175,00,000Calculate the goodwill of the firm on the basis of 4 years purchase of 5 years average profits.

Identify the steps involved in calculating goodwill under the capitalized value of average profits method:(A) Capitalize the average profits on the basis of the normal rate of return to ascertain the capitalized value of average profits(B) Ascertain the average profits based on the past few years' performance(C) Compute the value of goodwill by deducting net assets from the capitalized value of average profits(D) Ascertain the actual firm's capital (net assets) by deducting outside liabilities from the total assets (excluding goodwill and fictitious assets)Choose the correct answer from the options given below:

Under which method is the goodwill valued at an agreed number of years' purchase of the average profits of the past few years?

A, B and C are partners in a firm. If C retires/dies, his capital account is credited with:

Identify the steps involved in calculating goodwill under the capitalization of super profits method:(A) Calculate capital of the firm, which is equal to total assets (excluding goodwill and fictitious assets) minus outside liabilities(B) Multiply the super profits by the required rate of return multiplier(C) Calculate normal profits on capital employed(D) Calculate super profits by deducting normal profits from average profits(E) Calculate average profit for past yearsChoose the correct answer from the options given below:

What are the main factors affecting the value of goodwill?(A) Nature of business(B) Location(C) Efficiency of management(D) Market situationChoose the correct answer from the options given below:

________ is the value of the reputation of a firm in respect of the profits expected in future over and above the normal profits.