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Corporate Accounting 1st Edition Anita Raman, P. Radhika - Solutions
True or False. A company is not allowed to convert its fully-paid shares into stock.
State the differences between Internal and External reconstruction.
After writing off of all accumulated losses and fictitious assets, the balance in capital reduction account should be transferred to: (a). Share Capital A/c (b). Capital Reserve A/c (c). General Reserve A/c (d). Goodwill A/c.
True or False. Reconstruction Account is an alternative term for Capital Reduction Account.
Explain the terms Consolidation and Sub-division of Shares?
Any gain on revaluation of the assets at the time of internal reconstruction will be credited to: (a). Capital Reserve A/c (b). General Reserve A/c (c). Surrendered Shares A/c (d). Capital Reduction A/c.
Goodwill is an ____________ asset.
Give the definition of Goodwill.
Discuss the various methods of calculating Goodwill.
State which one of the following is not a main source for generating goodwill. (a). Providing easy credit facilities to customers (b). Location of the firm (c). Quality of the products (d). Name and fame of the management
True and False. Goodwill is an intangible asset.
Goodwill is the ____________ value of a firm’s anticipated excess earnings.
Why is Valuation of Goodwill needed?
Explain the factors affecting the value of goodwill of a company.
State which one of the following is not the main factor that would affect the value of goodwill. (a). Profitability (b). Size of the business (c). Normal rate of return (d). Capital employed
True and False. Generally, goodwill is not recorded in the books of accounts.
While evaluating goodwill, the purchaser is keen with regard to future _________.
What are the important factors that affect goodwill?
Which one of the following items is to be excluded while computing capital employed? (a). All fixed assets (b). All current assets (c). Fictitious assets (d). Trade investments
Explain the treatment of Partly Paid-up Shares.
The rate of earnings, which the investors in general expect on their investment, refers to ____________.
How do we determine the Normal Rate of Return?
True and False. Goodwill means the capacity of a business to earn profit at the current accounting period.
What are the different classes of equity shares?
Which one of the following has to be included while calculating capital employed? (a). Patents, trademarks and copyrights (b). Discount in issue of shares and debentures (c). Provision for bad debts (d). Bills receivable
True and False. Income from non-trading assets should be excluded while evaluating goodwill.
Capital employed is a combination of fixed assets and net ____________.
What is Capital Employed?
Valuation of shares is not an exact science- it is a sophisticated form of approximation.” Comment.
State which of the following methods is not a recognised method for goodwill valuation. (a). Average profit method (b). Annuity method (c). Capitalisation method (d). None of these.
True and False. Profit of the past years earned by the firm is a major factor that affects the value of goodwill.
The average capital employed may be determined by either _______ or _______ approach or way.
While evaluating goodwill, why do we consider average capital employed?
Capital employed” represents the funds provided by: (a). Creditors (b). Debenture holders (c). Shareholders (d). All of these
True and False. While computing capital employed, fictitious assets should be included.
True and False. All current liabilities should be excluded while computing capital employed.
Goodwill is equal to average profit multiplied by ____________.
What do you understand by Number of Year’s Purchase?
The average rate of return of similar firms in the similar industry is to be taken as: (a). Normal rate of return (b). Expected rate of return (c). Average rate of return (d). None of these
True and False. While computing average capital employed, provision for taxation should be treated as a part of profit.
____________ is referred to as the excess of expected average profit over normal profit.
What are the methods of calculating goodwill based on super profit?
State the following factor, which will not affect the value of shares. (a). Demand and supply of shares (b). Nature of company’s business (c). Profit-earning capacity of the company (d). Labour force
Explain Annuity Factor.
Normal profit is equal to average capital employed multiplied by ____________.
True and False. The amount of capital employed is directly proportional to the value of goodwill.
Under the Yield Method, the value of equity shares is calculated under the presumption that the company would be:(a). A going concern (b). Liquidated (c). Either (a) or (b) (d). None of these.
True and False. If the trend is increase in profit every year, then, weighted average method can be used to calculate the future maintainable profit.
What do you mean by Normal Rate of Return?
The average super profit is capitalised at a certain ____________, under capitalisation of super profit method.
Calculate the amount of goodwill on the basis of three years’ purchase of the last five years’ average profits. The profits for the last five years are: Year Year I Year II Year III Year IV Year V Amount (in) 9,600 14,400 20,000 6,000 10,000
True and False. Normal rate of return refers to the rate of profit normally earned by other similar firms in a particular industry.
Goodwill is equal to ____________ multiplied by annuity rate.
Calculate the amount of goodwill in the following case, on the basis of three years’ purchase of the last four years’ average profits. The profits and losses for the last four years are: Year 1995 1996 1997 1998 Amount (in) 20,000 32,000 12,000 (Loss) 24,000
Give the factors that affect the Value of Shares.
True and False. The value of goodwill will be maximum by the use of capitalisation of super profit method.
The profits of Swami Vivekananda Ltd. for the last five years are as follows: Compute the value of goodwill of Swami Vivekananda Ltd. on the basis of 4 years’ of purchase of weighted average profit after assigning weights 1, 2, 3, 4 and 5 serially to the profits.
Goodwill is equal to ____________ net tangible assets.
True and False. The proportion of liabilities and the capital affects the value of shares.
State the method to calculate the intrinsic value of shares.
It is essential to determine the value of the ____________ of the company, to ascertain the intrinsic value of shares.
While determining the value of shares, what are the factors to be considered in valuing the assets?
True and False. Investment should be valued at their book value while valuing the intrinsic value of shares.
Goodwill should be valued at ____________, while determining the value of shares.
True and False. While valuing the intrinsic value of shares by considering the assets value, the provision for bad and doubtful debts should not be taken into consideration.
Liabilities are valued at ____________.
True and False. The claim for surplus should not be deducted from the value of the assets in the case where the preference shares are participating preference shares.
The finished goods may be valued at ____________, while calculating the value of inventories.
Intrinsic value per share is equal to ____________ divided by the number of equity shares.
True and False. It is imperative to convert partly paid-up shares into fully paid-up shares by making a notional call, in the case of partly paid-up and fully paid-up shares.
True and False. The intrinsic value of shares and the yield value of shares are not connected with the fair value of shares.
Yield value per share is equal to expected rate of return divided by normal rate of return and multiplied by ____________.
True and False. The expected rate of return is computed when only a few shares are to be sold.
Fair value of shares is the ____________ of the net assets value and yield value of shares.
True and False. Asset backing method is another name of intrinsic value method.
Market value method is also known as ____________.
From the following items found in the trial balance of a company on 31st December 2016 and the adjustments given, show how the items would appear in the relevant accounts.Adjustments: (a). Income tax for 2018 has been assessed at ₹50,000, against which the advance payment of tax and tax
Define the term Dividend.
Amount realised from sale of goods is regarded in the statement of Profit & Loss as: (a). Other income.(b). Revenue from operations.(c). Any of the above. (d). None of the above.
True and False. Unclaimed dividend can be transferred to capital reserve after the expiry of six years.
Expenses incurred for the employees are called as ____________.
What are the legal requirements for preparing company final accounts as per Companies (Amendment) Act, 1988?
Gain on sale of fixed assets is shown in the statement of Profit & Loss as: (a). Other income (b). Revenue from operations (c). Any of the above (d). None of the above
True and False. Calls-in-Advance are shown as other current liability.
Expenses incurred by the company on the borrowings are called as ____________.
Discuss about the managerial remuneration eligible for different managerial personnel.
Dividend received by a financial company is shown in the statement of Profit & Loss as: (a). Other income (b). Revenue from operations (c). Any of the above (d). None of the above
True and False. Bank charges levied by the bank are shown as finance costs.
____________ is the distribution of cost of fixed cost over its useful life.
Write the format of statement of Profit & Loss as per Revised Schedule VI.
The following ledger balances were extracted from the books of Varun Ltd., as on 31st March 2016:Land & Building ₹2,00,000; 12% Debentures ₹2,00,000; Share Capital ₹10,00,000 (equity shares of ₹10 each, fully paid-up; Plant & Machinery ₹8,00,000; Goodwill ₹2,00,000; Investment
Raw materials purchased is considered in the statement of Profit & Loss as: (a). Cost of materials consumed (b). Purchase of stock in trade (c). Changes in inventories (d). None of these
True and False. Sale of scrap is treated as revenue from operations by a manufacturing company.
____________ is writing off of intangible assets.
Write the format of balance sheet as per Revised Schedule VI.
Goods purchased for reselling is regarded in the statement of Profit & Loss as: (a). Cost of materials consumed (b). Purchase of stock in trade (c). Changes in inventories (d). None of these
True and False. Shareholders can increase the rate of dividend as directed by the directors.
State any two items appearing under other income.
Share capital includes both ____________ and ____________.
What is meant by Corporate Dividend Tax? Write its accounting treatment.
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