Hidden Goodwill

Q.

What is the meaning of Cross Offer?

Q.

Captial employed in a business is Rs. 2, 00, 000. The normal rate of return on capital employed in 15%. During the year 2002, the firm earned a profit of Rs. 48, 000. Calculate goodwill on the basis of 3 yr purchase of super profit.

Q.

The average Net Profits expected in the furture by ABC Firm are Rs 36, 000 per year. The average capital employed in the business by the firm is Rs 2, 00, 000. The rate of Return from capital invested in this class of business is 10%. The remuneration of the partners is estimated to be Rs 6, 000 per annum. Find out the value of goodwill on the basis of two years' purchase of Super Profits.

Q.

A business has earned average profits of Rs 1, 00, 000 during the last few years and the normal rate of return in similar business is 10%. Find out the value of goodwill by :

(i) Capitalisation of super profit method.

(ii) Super profit method if the good will is valued at 3 years' purchase of super profit.

The assets of the business were Rs 10, 00, 000 and its external liabilities Rs 1, 80, 000.

Q.

What is the journal entry passed when an asset is brought in by new partner?

1. None of the above

2. Either A or B

3. Credited

4. Debited

Q.

A and B are two partners in a firm with capital of Rs 10, 000 and Rs 20, 000 respectively. They admit C in firm for 1/4 the profits in the firm. C brings Rs 12, 000 as his share of capital. What is the amount of goodwill ?

1. Rs 10000

2. Rs 6000

3. Rs 8000

4. None of the above

Q.

Write the various matters that need adjustments at the time of retirement of partner/partners.

Q.

A and B are two partners in a firm with capital of Rs.26, 000 and Rs.22, 000 respectively. They admit C in the firm for 1/4th profits in the firm. C brings Rs.26, 000 as his share of capital. What is the amount of goodwill ?

1. None of the above

2. Rs 3000

3. Rs 104000

4. Rs 30000

Q.

What is buy-back of shares?

Q. Goodwill is a fictitious asset.

1. True
2. False

Q.

State the need for treatment of goodwill on admission of a partner.

Q. Hidden goodwill in case of admission of a new partner is shared between the partners.

1. old
2. new
3. gaining
4. leaving

Q. Sahil and Sarthak are partners in a firm, and share profits and losses equally. Their capital contribution was ₹1, 00, 000 and ₹2, 00, 000, respectively. In addition, Sahil provided a loan of ₹70, 000 to the firm. The firm has incurred a loss of ₹50, 000 in the current year. Calculate the amount of interest on the loan given to Sahil.

[0.88 marks]

1. ₹4, 200
2. ₹3, 000
3. ₹6, 000
4. ₹10, 200

Q. $X$ and $Y$ are partners with capitals of $Rs.50,000$ each. They admit $Z$ as a partner with $1/4^{th}$ share in the profits of the firm. $Z$ brings in $Rs.80,000$ as his share of capital. The Profit and Loss Account showed a credit balance of $Rs.40,000$ as on date of admission of $Z$.
Give necessary Journal entries to record the goodwill.

Q. $A$ and $B$ are partners sharing profits in the ratio of $3:2$. Their books show goodwill at $Rs.2,000$. $C$ is admitted with $1/4^{th}$ share of profits and brings in $Rs.10,000$ as his capital but is not able to bring in cash for his share of goodwill $Rs.3,000$. Draft Journal entries.

Q. State the need for treatment of goodwill on admission of a partner.

Q. The extra capital of Rs.10, 000 bought by new partner above the investment of old partners to share the same proportion of profits is .

1. capital
2. goodwill
3. hidden goodwill
4. explicit goodwill

Q. Original cost =Rs. $12,00,000$. Salvage value =Rs. $2,00,000$. Useful Life$=10$ years. Annual depreciation = ? and rate of depreciation = ?

1. Rs. $1,00,000$ and $8.33$%
2. Rs. $1,20,000$ and $8.33$%
3. Rs. $1,20,000$ and $12$%
4. Rs. $1,00,000$ and $10$%

Q.

In the case of hidden goodwill, the new partner`s capital account is ___ with his share of goodwill.

1. Credited

2. Debited

3. None of the above

4. Either A or B

Q. $A$ and $B$ are partners in a firm with capital of $Rs.1,20,000$ respectively. They decide to admit $C$ into the partnership for $1/4^{th}$ share in the future profits. $C$ is to bring in a sum of $Rs.70,000$ as his capital. Calculate amount of goodwill.

Q. Question: Calculate the number of bills receivable dishonoured from the following information

	(Rs)
Opening balance of bills receivable	$1,20,000$
Bills collected (honoured)	$1,85,000$
Bills receivable endorsed	$22,800$
Closing balance of bills receivable	$50,700$
Bill receivable received	$1,50,000$

Q.

Find the cost of purchasing 150 shares of company, each of par value Rs. 10, quoted at Rs. 16 each in the market, from the original shareholder. Also, find the gain to the new shareholder if he sells each share at a premium of Rs. 10.

Q.

What is buy-back of shares?

Q. $M$ and $J$ are partners in a firm sharing profits in the ratio of $3:2$. They admit $R$ s a new partner. The new profit sharing ratio between $M,J$ and $R$ will be $5:3:2$. $R$ brought in $Rs.25,000$ for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.

Q. The new partner does not bring cash for his share of goodwill under the______.

1. Premium method
2. Revaluation method
3. Memorandum revaluation method
4. Super profit method

Q. Give Journal entries to record the following arrangements in the books of the firm:
(a) $B$ and $C$ are partners sharing profits in the ratio of $3:2$. $D$ is admitted paying a premium (goodwill) of $Rs.2,000$ for $1/4^{th}$ share of the profits, shares of $B$ and $C$ remain as before.
(b) $B$ and $C$ are partners sharing profits in the ratio of $3:2$. $D$ is admitted paying a premium of $Rs.2,100$ for $1/4^{th}$ share of profits which he acquires $1/6^{th}$ from $B$ and $1/{12}^{th}$ from $C$.

Q. How many parties are there in a Promissory note?

1. $5$
2. $4$
3. $3$
4. $2$

Q. Select the most appropriate alternative from those given below and rewrite the statement.

The liability of the partner in a firm is__________________.
a) zero
b) limited
c) unlimited
d) proportionate

Q. Towards goodwill a new partner at the time of admission contributes _______.

1. In cash
2. Does not pay cash
3. May or may not pay cash for goodwill
4. None of the above

Q. A folio in the purchases journal was added as Rs $34,680$, instead of Rs$36,480$. Identify the amount of the trial balance difference which will be placed in a suspense account.

1. Cr. $1,800$
2. Dr. $1,800$
3. Dr. $3,640$
4. Cr. $3,640$