{"id":58278,"date":"2024-04-16T01:16:42","date_gmt":"2024-04-16T01:16:42","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=58278"},"modified":"2024-04-16T01:16:42","modified_gmt":"2024-04-16T01:16:42","slug":"capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/","title":{"rendered":"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a96e8371aa71\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    Rs. 1,00,000                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    Rs. 1,50,000                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"true\">\r\n                    Rs. 2,00,000                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    Rs. 3,00,000                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is C. Rs. 2,00,000.<\/p>\n<p>Goodwill is an intangible asset that arises when a business is purchased for more than the fair value of its net assets. It is often referred to as the &#8220;goodwill and reputation&#8221; of a business.<\/p>\n<p>The capitalization method of goodwill valuation is based on the assumption that goodwill is the present value of the excess future profits that a business is expected to <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n  <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div>           Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> earn over and above the normal rate of return on its assets.<\/p>\n<p>To calculate goodwill using the capitalization method, you need to know the following:<\/p>\n<ul>\n<li>The capital employed in the business<\/li>\n<li>The normal rate of profit<\/li>\n<li>The expected future profits<\/li>\n<\/ul>\n<p>The capital employed is the total amount of money that has been invested in the business. This includes the amount of money that has been borrowed as well as the amount of money that has been invested by the owners.<\/p>\n<p>The normal rate of profit is the rate of profit that a business is expected to earn on its assets. This is usually determined by looking at the average rate of profit earned by similar businesses in the same industry.<\/p>\n<p>The expected future profits are the profits that the business is expected to earn in the future. These profits should be based on realistic expectations about the future performance of the business.<\/p>\n<p>Once you have this information, you can calculate goodwill using the following formula:<\/p>\n<p>Goodwill = Expected future profits x (1 + Normal rate of profit) \/ Capital employed<\/p>\n<p>In this case, the capital employed is Rs. 1,50,000, the normal rate of profit is 20%, and the expected future profits are Rs. 50,000. Therefore, the goodwill is calculated as follows:<\/p>\n<p>Goodwill = 50,000 x (1 + 20\/100) \/ 1,50,000 = 2,00,000<\/p>\n<p>Therefore, the amount of goodwill by capitalization method is Rs. 2,00,000.<\/p>\n<p>Option A is incorrect because it is the capital employed.<\/p>\n<p>Option B is incorrect because it is the normal rate of profit.<\/p>\n<p>Option D is incorrect because it is the expected future profits.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:\" \/>\n<meta property=\"og:description\" content=\"Subscribe on YouTube\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2024-04-16T01:16:42+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/","og_locale":"en_US","og_type":"article","og_title":"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:","og_description":"Subscribe on YouTube","og_url":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2024-04-16T01:16:42+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/","url":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/","name":"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2024-04-16T01:16:42+00:00","dateModified":"2024-04-16T01:16:42+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/capital-employed-in-a-business-is-rs-150000-profits-are-rs-50000-and-the-normal-rate-of-profit-is-20-the-amount-of-goodwill-by-capitalisation-method-will-be\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"mcq","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/mcq\/"},{"@type":"ListItem","position":3,"name":"accounting","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/mcq\/accounting\/"},{"@type":"ListItem","position":4,"name":"Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill by capitalisation method will be:"}]},{"@type":"WebSite","@id":"https:\/\/exam.pscnotes.com\/mcq\/#website","url":"https:\/\/exam.pscnotes.com\/mcq\/","name":"MCQ and Quiz for Exams","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/exam.pscnotes.com\/mcq\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209","name":"rawan239","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/d97f17072bfa490596c8f78363955d55?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/d97f17072bfa490596c8f78363955d55?s=96&d=mm&r=g","caption":"rawan239"},"sameAs":["https:\/\/exam.pscnotes.com"],"url":"https:\/\/exam.pscnotes.com\/mcq\/author\/rawan239\/"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/58278"}],"collection":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/comments?post=58278"}],"version-history":[{"count":0,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/58278\/revisions"}],"wp:attachment":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/media?parent=58278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/categories?post=58278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/tags?post=58278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}