Now a days, most of the Competitive Exams, Entrance Exams are conducted on MCQ. **Click HERE** to understand the Forms, Structure, Rules of MCQ, techniques of understanding, analysing and selection correct answer of MCQ,

For MCQ of Accounting Concepts, Accounting Principles & Policies, visit https://dvidya.com/accounting-conventions-mcq/**Play the Video** explaining some interesting aspects of selection of correct answer of MCQ.**Complete resources on Partnership Accounts**

**Partnership Goodwill Accounts MCQ**

**1. The profits of last five years are Rs.95,000, Rs.90,000, Rs.85,000, Rs.80,000 and Rs.75,000. Find the value of goodwill, if it’s calculated an average profit of last 5 years on the basis of 3 years of purchase:**

(a) Rs.85,000

(b) Rs.2,55,000

(c) Rs.2,75,000

(d) Rs.2,85,000

Profits of last five years = 95,000 +90,000 +85,000 +80,000+ 75,000 = 4.25.000

Average profit – Rs.4,25,000 /5 years = Rs.85,000

Value of goodwill Rs.85,000 x 3 years = Rs.2,55,000. Hence option. (b) is correct.

**2. Capital employed in a business is Rs.2, 00,000. Profits are Rs.50, 000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be: /3**

(a) Rs.2,00,000

(b) Rs.2,50,000

(c) Rs.40,000

(d) Rs.50,000

Capitalized value of business = (Future maintainable profits x 100) / Normal rate. = 50000/(20/100) =.50,000 x (100/20) =Rs.2,50,000

Capital employed = Rs.2,00,000. So, Value of Goodwill = 2,50,000-2,00,000=Rs.50,000

Hence option (d) is correct..

**3. A firm has an average profit of Rs.75, 000. Rate of return on capital employed is 12.5% p.a. Total capital employed in the firm was Rs.5, 00,000. Goodwill on the basis of 3 years purchase of super profits is:**

(a) Rs.37,500

(b) Rs.12,000

(c) Rs.62,500

(d) None of the above.

Normal profit=5,00,000 x 12.5/100 = 62,500. So, Super profit = (75,000 – 62,500) = Rs.12,500

At 3 years purchase of super profit, the value of goodwill=12,500 x 3 = Rs.37, 500.

Hence option (a) is correct.

**4. P and Q are partners in a firm with capital of Rs.10, 000 and Rs.20, 000. Z was admitted for 1/4 ^{th} share in profits and brings Rs.15, 000 as capital. Calculate the amount of goodwill:**

(a) Rs.45,000

(b) Rs.60,000

(c) Rs.15,000

(d) None of the above.

Capital of the firm on the basis of Z’s profit sharing ratio:

For 1/4^{th} share of profit capital = Rs.15,000

Total capital of the firm would be Rs.15, 000 / (1 /4) = Rs.60, 000.

Capital available =10,000 + 20,000 + 15,000 = 45,000. Goodwill = 60,000 – 45,000 = 15,000.

Hence option (c) is correct.

**5. Goodwill is to be calculated at 1.5 years of purchase of average profit of last 6 years. Profit earned during the first 3 years is Rs.40, 000, Rs.20, 000 and Rs10, 000 and losses suffered of Rs.4, 000, Rs.1, 000 and Rs.5, 000 in the three years. Goodwill will be: /4**

(a) Rs.10,000

(b) Rs.15,000

(c) Rs.20,000

(d) Rs.25,000

Total Profit =(40, 000 +20, 000=10, 000 = 70000. Total Loss= 4, 000 +1, 000+ 5, 000=10000

So, Net Profit in 6 years = 70000-10000=60000. Average profit – Rs.60,000 /6 = Rs.10,000

So, value of goodwill = Rs.10, 000 x 1.5 yrs. = Rs.15, 000. Hence option (b) is correct.

**6. A firm earned total profits of 60,000 during last 3 years The capital investment in the firm is Rs.1, 50,000. Having regarded to risk involved 10% is the fair return on capital employed. Goodwill on the basis of 2 years purchase of average super profits earned during 3 years is:**

(a) Rs.8,000

(b) Rs.10,000

(c) Rs.12,000

(d) Rs.15,000

Capital employed = Rs.1,50,000. Normal Return = 1,50,000 x 10/100 = Rs.15, 000.

Average profit = 60000/3 = Rs.20,000. Super profit = 20,000 – 15,000 = Rs.5,000

Value of Goodwill = Rs.5, 000 x 2 = Rs.10, 000. Hence option (b) is correct.

**7. Total profits of last 4 years are:2,60,000. What is the value of goodwill on the basis of 3 years purchase of average profits based on last years?**

(a) Rs.3,44,667

(b) Rs.1,95,000

(c) Rs.1,50,000

(d) None of the above.

Average Yearly profit = 2,60,000 /4 = 65,000. Value of goodwill =65,000 x 3 = 1,95,000. Hence option (b) is correct

**8. Capital of A, B and C at the end of year are Rs.70, 000, Rs.50, 000 and Rs.30, 000 Respectively. Net profit was Rs.81, 000. Profit sharing ratio 5:3:1. Find out capitals of A at the beginning of the year is**

(a) 25000

(b) 32000

(c) 27000

(d) None of the above

Capital at the end of year = 70000 + 50000+ 30000 = 150000. Profit during year = 81,000 shared as : A=81000 x 5/9 = 45000, B= 81000 x 3/9 = 27000, C= 81000 / 9 = 9000 So, Capital at beginning for A = 70000 – 45000 = 25000, B= 50000 – 27000 = 23000 & C= 30000-9000 = 21000. Hence option (a) is correct.

**9. X and Y are partners sharing profits and losses in the ratio of 3:2 having the capital of Rs.80,000 and Rs.50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs.7,800 before allowing any interest on capital. Profits apportioned among X and Y is:**

(a) Rs.4,680 and Rs.3,120

(b) Rs.4,800 and Rs.3,000

(c) Rs.5,000 and Rs.2,800

(d) None of the above.

Interest on capital = 9% on 1,30,000 = 11700. As the firm does not have sufficient profit to pay interest on capital, no interest on Capital is payable. The profit of 7800 would be divided in the ratio of 3:2. So X will get 7800 x 3/5 = 4680 & & Y will get 7800 x 2/5 = 3120. Hence option (a) is correct.

**10. P and Q are partners with the capital of Rs.25, 000 and Rs.15, 000 respectively. Interest payable on capital is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs.2, 400.**

(a) Rs.2,500 and Rs.1,500

(b) Rs.1,500 and Rs.900

(c) No interest will be paid to the partners.

(d) None of the above.

Interest on capital = 10% on 40000 = 4000. As the firm does not have sufficient profit to pay interest on capital, no interest is payable. Hence option (c) is correct.