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Goodwill Multiple Choice Questions
- Which of the following is definition of goodwill?
- Current asset.
- Fictitious asset.
- Liquid asset.
- Intangible asset.
Answer: 4
- When is the method of weighted average for calculating the goodwill is used?
- When profits are fluctuating.
- When the profit is not the same.
- When profits show decreasing or increasing trend.
- None of the above
Answer: 3
- What is the formula for calculating the goodwill under the capitalization method?
- Average profits are divided by the rate of return.
- Average profits multiplied by the rate of return.
- Super profits multiplied by the rate of return.
- Super profits are divided by the rate of return.
Answer: 4
- If a change in partner’s association initiates a formation of a new agreement it is known as
- The realization of partnership.
- Revaluation of partnership.
- Reconstitution of partnership.
- None of the above.
Answer: 3
- The goodwill of an organization won’t be affected by?
- Surplus.
- Location of the organization.
- Super profit.
- None of the above.
Answer: 4
- What does break even indicate?
- Costs are more than revenue.
- Revenues are more than cost.
- Revenues and costs are equal.
- None of the above.
Answer: 3
- The reward an organization receives by selling its assets at a high rate of price beyond its fair value is
- Reserve.
- Surplus.
- Goodwill.
- Super profit.
Answer: 3
- What is the formula for calculating goodwill based on Annuity?
- Super profit multiplied by Annuity value of Re. 1
- The number of years’ purchases multiplied by average profit.
- Several years’ purchases multiplied by super profit.
- Average profit multiplied by annuity value of Re. 1
Answer: 1
- Which of the following types of goodwill are considered to be the best?
- Cow goodwill.
- Rat goodwill.
- Dog goodwill.
- Cat goodwill.
Answer: 4
- Identify the correct statement
- Goodwill is a current asset.
- Goodwill is a fictitious asset.
- Goodwill is a liability.
- Goodwill is an intangible asset.
Answer: 4
- Super profit being zero indicates that the actual average profit is less than or equal to the normal profit. State if it is true or false.
- False.
- Partially True.
- True.
- None of the above.
Answer: 3
- Excess of profits over what is called super profit?
- Actual, super.
- Super, normal.
- Super, actual.
- Actual, normal.
Answer: 4
- Which goodwill is recorded in the book of accounts as per accounting standard 26?
- Self-generated.
- Purchased.
- Both.
- None.
Answer: 2
- Is average capital employed taken into consideration while calculating average profit?
- No.
- Yes.
- Partially true.
- Can’t say.
Answer: 1
- Goodwill helps an organization in bringing what kind of profits?
- Similar.
- Less.
- Excess.
- No profit at all.
Answer: 3
- State the ones that could be advantageous for an organization in goodwill generation.
- Patents.
- Long-term contracts.
- Import licenses.
- All of the above.
Answer: 4
- What value would goodwill have if super profit is zero?
- Negative.
- Positive.
- Nil.
Answer: 3
- State the feature of goodwill among these
- Doesn’t affect the organization’s profit.
- Fictitious asset.
- Invaluable asset.
- Difficult to calculate value.
Answer: D
- Goodwill needs to be valued when?
- During admission of a new partner in the organization.
- After the death of a partner.
- During the retirement of a partner.
- All of the above.
Answer: 4
- How is goodwill accounted for in the balance sheet?
- Is partly shown in the balance sheet.
- Not shown in the balance sheet.
- Is shown on the balance sheet.
- It May or may not be shown on the balance sheet.
Answer: 3
- During the amalgamation of a partnership, the firm is there a need to value goodwill?
- No.
- Yes.
- Can’t say.
- Partially true.
Answer: B
- Is it true that the competency of management does not affect goodwill?
- False.
- True.
- Partially false.
- None of the above.
Answer: A
- What are the factors that affect goodwill?
- The efficiency of management.
- Technical know-how.
- Location of the customers.
- All the above
Answer: 4
- Are non-business incomes added while calculating average profit?
- No.
- Yes.
- Partially added.
- None of the above.
Answer: 1
- What is the formula for calculating goodwill under the super profit method?
- Super profit divided by normal rate of return.
- The number of years purchases multiplied by average profit.
- The number of years’ purchases multiplied by super profit.
- Super profit minus normal profit.
Answer: 3
- Is it true that goodwill calculated by one method is equivalent to goodwill calculated by other methods?
- Partially true.
- True.
- False
- Can’t say.
Answer: 3
- In what ways can a business acquire purchased goodwill?
- By kind.
- By cash.
- By both cash and kind.
- None of the above.
Answer: 3
- Goodwill is classified into
- Self-generated goodwill.
- Purchased goodwill.
- Both self-generated & purchased.
- None of the above.
Answer: 3
- As per accounting standards 26, which goodwill can be recorded in the book of accounts?
- Purchased goodwill.
- Self-generated goodwill.
- Both self-generated & purchased goodwill.
- None of the above.
Answer: 1
- What are the methods of valuation of goodwill?
- Capitalization of average and super profit method.
- Annuity method.
- Super profit method.
- Average profit method & weighted average profit method.
- All of the above-mentioned methods.
Answer: E
- What is the meaning of super profit?
- Average profit added to normal profit.
- Less than the normal profit.
- More than normal profit.
- None of the above.
Answer: 3
- What is capital employed?
- Total assets added to capital.
- Total assets equaling liabilities.
- Liabilities are deducted from total assets.
- Liabilities are deducted from total assets excluding goodwill.
Answer: 4
- Goodwill is considered to be an intangible asset & not a fictitious one because
- Goodwill has value.
- Goodwill can be sold.
- Goodwill can be realized.
- All of the above-mentioned points.
Answer: 4
- What kind of an account is a goodwill account?
- Real a/c.
- Nominal a/c.
- Personal a/c.
- Not an a/c.
Answer: 3
- “Goodwill is a thing very easy to describe, very difficult to define. It is the benefit and advantage of a good name, reputation, and connection of a business. It is the attractive force which brings in customers. It is one thing which distinguishes an old-established business from a new business at its start.” Who gave this definition?
- Lord Eldon.
- Lord S.L Paul
- Lord Macraughton.
- Lord D.Pola.
Answer: 3
- Identify the one that is not concerning goodwill.
- It has realizable value.
- It is an intangible asset.
- It is a fictitious asset.
- All of these.
Answer: 3
37. What is the formula for calculating the profit weighted average?
- Weighted average profit equals total normal profit divided by the total amount of weights.
- Weighted average profit equals average profit minus normal profit.
- Weighted average profit equals to total product of profit divided by the number of years.
- Weighted average profit equals total products of profit divided by the total amount of weights.
Answer: 4
- What is the formula for the valuation of goodwill based on the capitalization of super profit?
- Goodwill equals to average profit multiplied by 100 divided by the normal rate of return.
- Goodwill equals super profit multiplied by the normal rate of return divided by 100.
- Goodwill equals super profit multiplied by 100 divided by the normal rate of return.
- Goodwill equals normal profit multiplied by 100 divided by the normal rate of return.
Answer: 3
- What is meant by the number of years purchase?
- The number of years’ purchase means 12 years of profit.
- It means to profit from the past 10 years.
- It means the profit that is expected in the next 15 years.
- It means for how many years the organization will earn the same amount of profit in the future because of its past efforts.
Answer: 4
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