CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
A firm's average maintainable profit is ₹6,00,000 and the normal rate of return in the industry is 12%. Under the capitalisation of average profit method, goodwill equals capitalised value of average profit less net assets. If the net assets employed are ₹40,00,000, what is the goodwill?
Goodwill is ₹10,00,000. Capitalising the average profit of ₹6,00,000 at 12% gives ₹50,00,000, and deducting the net assets of ₹40,00,000 leaves goodwill of ₹10,00,000 under the capitalisation method.
- A₹10,00,000Correct
- B₹32,00,000
- C₹50,00,000
- D₹7,20,000
Explanation
Capitalised value = 6,00,000 / 12% = ₹50,00,000. Goodwill = 50,00,000 - 40,00,000 = ₹10,00,000. Option ₹50,00,000 forgets to deduct net assets.
Did you get it right without looking?
One question tells you little. A timed set on Related Aspects of Company Accounts shows your real accuracy, how long you take and where you lose marks.
More Related Aspects of Company Accounts questions
- A company was incorporated on 1 August 2025 and took over a business with effect from 1 April 2025. The accounts are made up to 31 March 202…
- Average profit of Kaveri Ltd. is ₹5,00,000 and capital employed is ₹20,00,000. Normal rate of return is 15%. Under the super profit method, …
- According to Section 71 of the Companies Act, 2013 as given in the official text, the amount credited to the debenture redemption reserve ac…
- Under the Companies Act, 2013, within how many days of the last date of completion of a buy-back must a company extinguish and physically de…
- Which statement about issuing bonus shares is correct under the Companies Act, 2013?
- Under the Companies Act, 2013, which of the following preference shares of a company limited by shares can be redeemed?