Partnership Accounts : Goodwill- Concept and Valuation — Practice Quiz
ICSE · Class 12 · Accountancy
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Quick Quiz: Partnership Accounts : Goodwill- Concept and Valuation
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A firm has average profit of ₹80,000 and normal rate of return of 10%. Its capital employed is ₹6,00,000. What is the value of goodwill by the super profit method if goodwill is valued at 3 years' purchase of super profit?
A firm has capital employed of ₹5,00,000, average profit of ₹90,000, and normal rate of return of 15%. What is the value of goodwill by capitalisation of average profit method?
A firm earned profits of ₹40,000, ₹50,000, ₹60,000, and ₹70,000 for four years. A future recurring expense of ₹10,000 per year is to be adjusted out. What is the value of goodwill if it is valued at 2 years' purchase of simple average profit?
A firm has weighted profits using weights 1, 2, 3, and 4 for four years. The profits are ₹20,000, ₹25,000, ₹30,000, and ₹35,000. What is the value of goodwill at 2 years' purchase of weighted average profit?
Sample Questions
A firm has capital employed of ₹4,00,000 and average profit of ₹72,000. Normal rate of return is 15%. What is the goodwill by capitalisation of super profit method?
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₹80,000
Normal profit = ₹4,00,000 × 15/100 = ₹60,000. Super profit = ₹72,000 - ₹60,000 = ₹12,000. Goodwill = ₹12,000 × 100/15 = ₹80,000.
Goodwill is an intangible asset in a profit-seeking business. Which statement about goodwill is correct?
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It cannot be seen or touched but can be felt
Goodwill is intangible, so it cannot be seen or touched. It still has value in a profit-seeking business.
The goodwill of a business is best described as the value of its _____.
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reputation
Goodwill is the value of the reputation of a firm that helps it earn higher profits.
Which definition of goodwill says that it is the probability that old customers will resort to the old place?
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Lord Eldon
Lord Eldon is credited with that definition of goodwill.
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