Wednesday, January 23, 2019

AHSEC Accountancy Question Bank: Valuation of Goodwill


Valuation of Goodwill
Q.1. The following is the information relating to a firm:
Profits
(Rs.)
2008
2009
2010
2011
7,000
10,000
9,500
7,500
 Calculate the value of goodwill on the basis of three years’ purchase of four years average profit.
Q.2. The following is the information relating to a firm:
Profits
(Rs.)
2008
2009
2010
2011
7,000
10,000
9,500
7,500
Partner’s remuneration Rs. 2,500 per annum. Calculate the value of goodwill on the basis of two years’ purchase of average profit.
Q.3. From the following information, ascertain the value of goodwill on the basis of 3 years’ purchase of super profit.
a)      Average profit Rs. 22,000,
b)      Capital employed Rs. 2,00,000,
c)       Normal Rate of Return 10%.
Q.4. From the following information, calculate goodwill according to capitalization of average profit method:
a)      Net tangible assets Rs. 4,40,000,
b)      Average profit for the last 4 years Rs. 52,000,
c)       Normal rate of return 10%.
Q.5. From the following information, calculate the value of goodwill on the basis of 3 years’ purchase of super profit:
1)      Capital employed Rs. 5,00,000;
2)      Average profit after tax Rs. 60,000;
3)      Average profit earned by an average firm in industry is Rs. 30,000 with capital employed of Rs. 3,00,000
Q.6. A business has earned average profit of Rs. 60,000 during the last few years. The assets of the business are Rs. 5, 40,000 and its external liabilities are Rs. 80,000. Cash included in assets Rs. 40,000. External liabilities include Rs.50, 000 due to creditors. The normal rate of return is 10%. Calculate the value of goodwill on the basis of:
Ø  Capitalisation of super profits.
Ø  Capitalisation of Average profits
Q.7. The capital of a firm of Arpit and Prajwal is Rs. 10, 00,000. The market rate of return is 15% and the goodwill of the firm has been valued Rs. 1, 80,000 at two years purchase of super profits. Find the average profits of the firm.
Q.8. The profits for last 5 years of a firm are Rs. 20,000; Rs.50, 000; Rs. 60,000; Rs. (50,000) and Rs. 70,000. Value of assets of the firm is Rs. 1, 00,000 and value of liabilities of the firm is Rs. 45,000. Expected profit from the similar business is @10%. Calculate the amount of goodwill on the basis of:
Ø  2 year’s purchase of average profit of last 5 years.
Ø  3 years purchase of super profit of last 4 years.
Ø  Capitalisation of super profit of last 5 years.
Q.9. The profits for last 5 years of a firm are Rs. 20,000; Rs.50, 000; Rs. 60,000; Rs. (50,000) and Rs. 70,000. Weight assigned to the years are 1,2,3,4 and 5 respectively. Value of assets of the firm is Rs. 1, 00,000 and value of liabilities of the firm is Rs. 45,000. Expected profit from the similar business is @10%. Calculate the amount of goodwill on the basis of:
Ø  2 year’s purchase of weighted average profit of last 5 years.
Ø  3 years purchase of weighted super profit of last 4 years.
Ø  Capitalisation of weighted super profit of last 5 years.

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