Valuation of Goodwill & Shares – Corporate and Management Accounting MCQ

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Valuation of Goodwill & Shares – Corporate and Management Accounting MCQ

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Total assets of X Ltd. are ₹ 5,00,000 and total liabilities are ₹ 2,00,000. The company has three types of equity shares:36,000 shares of ₹ 10 each fully paid-up18,000 shares of ₹ 10 each, ₹ 8 paid up.30,000 shares of ₹ 5 each, ₹ 5 paid up.The company has earned ₹ 2,94,300 as profit after tax, which can be considered to be normal for the company. AverageEPS for a fully paid share of ₹ 10 of a Company in the same industry in ₹ 2.Value per share on EPS basis of 30,000 shares of 10 each, ₹ 5 paid-up is –

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Total assets of X Ltd. are ₹ 23,00,000 and total liabilities are ₹ 12,00,000. Expert valued goodwill of the company at ₹ 6,50,000. The company has two types of equity shares:25.000 shares of ₹ 10 each fully paid-up25.000 shares of ₹ 5 each, ₹ 3 paid-up.Intrinsic value per share of ₹ 3 paid- up is:

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The profit available for equity share-holder of JK Ltd. is ₹ 1,27,500. The company has two types of equity shares:50,000 shares of ₹ 10 each fully paid-up50,000 shares of 10 each, ₹ 7 paid up.Other companies in the same industries pay dividends @ 20%.Yield value per share of ₹ 7 paid-up share is –

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Total assets of X Ltd. are ₹ 10,00,000 and total liabilities are ₹ 4,00,000. Expert valued goodwill of the company at ₹ 2,00,000. The company has two types of equity shares:50,000 shares of ₹ 10 each fully paid-up50,000 shares of ₹ 10 each, ₹ 7 paid up.Intrinsic value per share of ₹ 7 paid- up is:

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Compute the amount of goodwill based on 3 years purchase of super profit from the following:Future maintainable profit after tax: ₹ 15,00,000;Normal pre-tax rate of return: 20%;Capital employed: ₹ 60,00,000; Tax rate: 30%

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From the following particulars, calculate goodwill on the basis of 3 years purchase of super-profits:Capital employed: ₹ 50,000Trading profit (after tax):
2011: ₹ 12,2002012: ₹ 15,0002013: ₹ 2,000 (loss)2014: ₹ 21,000The normal rate of interest on investment 10% p.a. Remuneration from alternative employment: ₹ 3,600 p.a. (included in above profit).

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The average net profit of a business as adjusted for valuation of goodwill amounted to ₹ 2,35,000. Net tangible assets employed were of the value of ₹ 4,50,000. But upon valuation, they amounted to ₹ 15,00,000. Assuming that 10% represented a fair commercial return, the value of goodwill by capitalizing super-profits will be___

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The average net profit before adjustments is ₹ 5,14,000. Profit includes interest at 8% on non-trading investments. The cost of these investments is ₹ 1,98,200 while the face value is ₹ 2,00,000. Expenses amounting to ₹ 7,000 per annum are likely to be discontinued in the future. The provision for income tax to be made at 30%. The normal rate of return may be taken at 10%. The average capital employed in the business (including investments) is ₹ 18,98,200. Assuming 4 years purchase of super-profits, what is the value of goodwill?

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Profit after tax of Z Ltd. for the 3 financial years are as follows:

2013 ₹ 4,41,000
2014 ₹ 6,45,000
2015 ₹ 4,80,000Capital employed is ₹ 29,25,000. The normal rate of return is 10%. The tax rate is 40%. 10% of profits for the year 2014 arose from a transaction of non-recurring nature. A provision of ₹ 31,500 on sundry debtors was made in the financial year 2005 which is no longer required. A claim of ₹ 16,500 is to be provided against profit for the year 2015. Goodwill may be calculated at 3 times adjusted average profits of 3 years.

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The following information is available for N Ltd.:Valuation of Goodwill & Shares – Corporate and Management Accounting MCQ 3Capital employed is ₹ 5,40,000. A standard rate of return on capital employed in this type of business is 12%. The above net profit included a fixed income on non-trading investment of ₹ 8,000 per year. At the end of the year, 2008-2009 closing stock was overvalued by ₹ 25,000. Calculate goodwill on a weighted average super profit basis at 3 years of purchase. Ignore taxation.

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Profits & losses for the last years are:2011- 2012 Losses ₹ 10,0002012- 2013 Losses ₹ 2,5002013- 2014 Profits ₹ 98,0002014- 2015 Profits ₹ 76,000The average capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be ₹ 1,000 per month. Calculate the value of goodwill on the basis of four years purchase of super-profits based on the annuity of the four years. Take discounting rate as 10%.

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The net profits after tax of NZ & Co. for the past 3 years are as follows:

Year Profit (₹)
2010-2011 20,000
2011-2012 2,61,000
2012-2013 3,12,000Closing stock for 2011-2012 and 20122013 includes the defective items of ₹ 22,000 and ₹ 62,000 respectively which were considered as having no market value. Calculate goodwill on the average profit method.

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The following particulars are available in respect of the business carried on by X Ltd.:Valuation of Goodwill & Shares – Corporate and Management Accounting MCQ 2You are required to compute the value of goodwill on the basis of 5 years purchase of average profit.

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The net profits after tax of Z Ltd. for the past 5 years are as follows:

Year Profit
2007-2008 2,56,000
2008-2009 2,64,000
2009-2010 3,76,000
2010-2011 4,86,000
2011-2012 5,30,500The capital employed is ₹ 16,00,000. The rate of normal return is 15%. Calculate the value of the goodwill on the basis of the annuity method on a super-profits basis, taking the present value of an annuity of ₹ 1 for the 4 years at 15% as ₹ 2.855.

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Find the goodwill from the following information:Capital employed – ₹ 8,25,000Rate of normal return – 10%Future Maintainable profit – ₹ 1,50,000Annuity factor – 3.17

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A company has a total capital investment of ₹ 3,60,000. The company earned net profit during the last four years as ₹ 56,000, ₹ 64,000, ₹ 96,000 & ₹ 80,000. The fair return on the net capital employed is 15%. Value of goodwill if it is based on 3 years purchase of the average super-profits of past 4 years.

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The profits for 2016-2017 is ₹ 2,000; for 2017-2018 is ₹ 26,100 and for 20182019 is ₹ 31,200. Closing stock for 2017-2018 and 2018-2019 includes the defective items of ₹ 2,200 and ₹ 6,200 respectively which were considered as having market value nil. Calculate goodwill on the average profit method.

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The average profit of a firm is ₹ 1,20,000. The rate of capitalization is 12%. Assets and liabilities of the company are ₹ 10,00,000 & ₹ 4,25,000 respectively.

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Find the goodwill of the firm using the capitalization method from the following information:Capital employed = ₹ 4,80,000.Rate of normal return = 15%.Profits for the year = ₹ 90,000

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Find the goodwill from the following information:Capital employed – ₹ 11,00,000Rate of normal return – 10%Future Maintainable profit – ₹ 2,00,000 No. of year purchases – 3 years

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Find the goodwill of the company from the following information:Total Capital Employed = ₹ 8,00,000Reasonable Rate of Return = 15%Profits for the year = ₹ 12,00,000Use capitalization method.

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It is agreed that goodwill of the firm is valued at 2 years purchase of weighted average profits for the last 3 years.Valuation of Goodwill & Shares – Corporate and Management Accounting MCQ 1Value of goodwill will be –

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It is agreed that goodwill of the company is to be valued at 3 years purchase of average profits for the last 5 years.

Year ended Profit/(loss)
₹ in ‘000
31st March 2015 16,110
31st March 2016 11,850
31st March 2017 8,145
31st March 2018 (600)
31st March 2019 12,750Value of goodwill will be –

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The profits of last 5 years are ₹ 60,000; ₹ 67,500; ₹ 52,500; ₹ 75,000 & ₹ 60,000. Find the value of goodwill, if it is calculated on average profits of last 5 years on the basis of 3 years of purchase.

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Which of the following is not required while calculating yield value per share?

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In the balance sheet shares appears at___

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Super profit means –

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Which of the following is NOT the method of valuation of Goodwill?

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As per AS-26, expenditure on research or on the research phase of an internal project should be recognized when it is incurred.

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As per AS-26, the intangible asset can be recognized at –

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If control over the future economic benefits from an intangible asset is achieved through legal rights that have been granted for a finite period, the useful life of the intangible asset should not exceed the period of the legal rights unless:

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As per AS-26, there is a rebuttable presumption that the useful life of an intangible asset will not exceed___from the date when the asset is available for use.

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Which of the following Accounting Standard deals with Intangible Assets?

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The market value of share =

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As per the valuation of equity shares based on the price-earnings ratio, the shares are valued on the basis of __ multiplied by the price-earnings ratio.

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Fair value is the average of the –

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When controlling shares are to be sold then which of the following will be the appropriate base for valuation of shares:

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For which one or more of the following reasons is the recognition as an asset of an internally generated intangible prohibited? ,(a) Because there may not be an active market for that asset.(b) Because its cost is usually relatively insignificant.(c) Because it is difficult to reliably identify the related costs(d) Because it is difficult to establish the probability of flow of economic benefits

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While deciding net asset value, fictitious assets –

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In which of the following cases valuation is essential?

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Statement I:Net Asset Method can be fairly used to value shares when the firm is liquidated.
Statement II:This method does not give any weight to earning capacity of the company.

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Which of the following is deducted while calculating net assets available to equity shareholders?

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Net asset value per share is also known as –

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Goodwill is –

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Which of the following shall not be taken into consideration while calculating Capital Employed?

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Which of the following is required to be taken into consideration while valuing equity shares of the company?

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Market value method is generally the most preferred method in case of –

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Market-based methods of valuation should not be adopted when –

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If the intrinsic value of a share of common stock is less than its market value, which of the following is the most reasonable conclusion?

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