CA CPT Exam > CA CPT Questions > Find the goodwill of the firm using capitaliz...
Start Learning for Free
Find the goodwill of the firm using capitalization method from the following information:
Total capital employed in the firm Rs. 80,00,000
Reasonable rate of return 15%
Profits for the year Rs. 12,00,000
Total capital employed in the firm Rs. 80,00,000
Reasonable rate of return 15%
Profits for the year Rs. 12,00,000
- a)Rs. 68,00,000.
- b)Rs. 12,00,000.
- c)Rs. 11,88,000.
- d)Nil.
Correct answer is option 'D'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
Find the goodwill of the firm using capitalization method from the fol...
To find the goodwill of the firm using the capitalization method, we need to calculate the value of the firm based on its current earnings.
The formula for calculating goodwill using the capitalization method is:
Goodwill = (Profits for the year / Reasonable rate of return) - Total capital employed in the firm
Let's calculate the goodwill using the given information:
Profits for the year = Rs. 12,00,000
Reasonable rate of return = 15%
Total capital employed in the firm = Rs. 80,00,000
Goodwill = (12,00,000 / 15%) - 80,00,000
Goodwill = (12,00,000 / 0.15) - 80,00,000
Goodwill = 80,00,000 - 80,00,000
Goodwill = 0
Therefore, the goodwill of the firm using the capitalization method is Nil (option D).
Explanation:
The capitalization method is used to calculate the value of a firm based on its expected future earnings. It assumes that the firm's value is equal to its earnings divided by a reasonable rate of return. The difference between the firm's value and its total capital employed is known as goodwill.
In this case, the profits for the year are Rs. 12,00,000 and the reasonable rate of return is 15%. The total capital employed in the firm is Rs. 80,00,000.
Using the formula mentioned above, we can calculate the goodwill. However, when we substitute the values into the formula, we find that the goodwill is equal to zero. This means that the firm's value is equal to its total capital employed, and there is no goodwill.
Therefore, the correct answer is option D - Nil.
The formula for calculating goodwill using the capitalization method is:
Goodwill = (Profits for the year / Reasonable rate of return) - Total capital employed in the firm
Let's calculate the goodwill using the given information:
Profits for the year = Rs. 12,00,000
Reasonable rate of return = 15%
Total capital employed in the firm = Rs. 80,00,000
Goodwill = (12,00,000 / 15%) - 80,00,000
Goodwill = (12,00,000 / 0.15) - 80,00,000
Goodwill = 80,00,000 - 80,00,000
Goodwill = 0
Therefore, the goodwill of the firm using the capitalization method is Nil (option D).
Explanation:
The capitalization method is used to calculate the value of a firm based on its expected future earnings. It assumes that the firm's value is equal to its earnings divided by a reasonable rate of return. The difference between the firm's value and its total capital employed is known as goodwill.
In this case, the profits for the year are Rs. 12,00,000 and the reasonable rate of return is 15%. The total capital employed in the firm is Rs. 80,00,000.
Using the formula mentioned above, we can calculate the goodwill. However, when we substitute the values into the formula, we find that the goodwill is equal to zero. This means that the firm's value is equal to its total capital employed, and there is no goodwill.
Therefore, the correct answer is option D - Nil.
Attention CA CPT Students!
To make sure you are not studying endlessly, EduRev has designed CA CPT study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA CPT.
|
Explore Courses for CA CPT exam
|
|
Similar CA CPT Doubts
Top Courses for CA CPTView all
Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?
Question Description
Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?.
Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?.
Solutions for Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA CPT.
Download more important topics, notes, lectures and mock test series for CA CPT Exam by signing up for free.
Here you can find the meaning of Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Find the goodwill of the firm using capitalization method from the following information:Total capital employed in the firm Rs. 80,00,000Reasonable rate of return 15%Profits for the year Rs. 12,00,000a)Rs. 68,00,000.b)Rs. 12,00,000.c)Rs. 11,88,000.d)Nil.Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice CA CPT tests.
|
|
Explore Courses for CA CPT exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup