FULL SYLLABUS TEST

CORPORATE & MANAGEMENT ACCOUNTING (CMA)

DEC 22 STUDENTS
3 HOURS (100 MARKS)
PART A
CORPORATE ACCOUNTING (60 MARKS)
1. In case there is any conflict between Accounting Standards & Schedule III requirements,
then _____________shall Prevail:
(a) Accounting Standards
(b) Schedule III
(c) Whichever is favourable for company
(d) As the MCA Directs

2. A 3-Year Loan taken for a business with a 4-year Operating Cycle will be categorized only
as _________________:
(a) Short Term Borrowings
(b) Long Term Borrowings
(c) Other Current Liabilities
(d) Other Non-Current Liabilities

3. Net profit or loss will be derived at _____Stage of Accounting.

(a) Classifying
(b) Interpretation
(c) Recording
(d) Summarizing

4. On January 1, Ram paid rent of ` 10,000. This can be classified as:

(a) An Event
(b) A Transaction
(c) A Transaction as well as an Event
(d) Neither a Transaction nor an Event

5. Closing entries are recording in:

(a) Cash book
(b) Ledger
(c) Journal Proper
(d) Balance sheet

6. Bad Debts recovered Account is a:

(a) Real Account
(b) Personal Account
(c) Nominal Account
(d) None

7. Purchase of fixed asset on Cash basis is recorded in:

(a) Purchase book
(b) Cash book
(c) Journal proper
(d) Sales Book

8. Normally, the following accounts are balanced:

(a) Personal and nominal

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(b) Real and nominal
(c) Personal and real
(d) All accounts

9. Amount spent, for the construction of temporary huts, which were necessary for
construction of the cinema house and demolished when the cinema house was ready is a
(a) Revenue expenditure
(b) Capital expenditure
(c) Deferred revenue expenditure
(d) None of the above

10. Which of the following reserve cannot be used for payment of dividend?
(a) Capital Reserve
(b) Securities Premium Reserve
(c) Capital Redemption Reserve
(d) All of above

11. A company invited application for subscription of 15,000 shares. The applications were
received for 18,000 shares. The shares were allotted on pro-rata basis. If Shyam applied for
240 shares, how many shares would be allotted to him?
(a) 180 Shares
(b) 200 Shares
(c) 150 Shares
(d) 175 Shares

12. 3,000 shares of `10 each of Krishna were forfeited by crediting `6,000 to share forfeiture
account. Out of these, 1,800 shares were re-issued to Radhe for `9 per share. The amount
to be transferred to capital reserve account will be
(a) `3,200
(b) `2,000
(c) `1,800
(d) `1,200

13. Following information pertains to X Ltd.

Rs.
Equity share capital called up 4,60,000
Calls in arrears 60,000
Calls in advance 5,000
Proposed dividend 5%
The amount of dividend payable will be ______
(a) `22,625
(b) `23,000
(c) `20,000
(d) `20,375

14. A Ltd acquired assets worth ` 25,00,000 from H ltd by issue of shares of ` 100 @ premium
of 25%. The number of shares issued to settle the purchase consideration will be:
(a) 33,333
(b) 25,000
(c) 18,750
(d) 20,000

15. If a share of ` 10 on which ` 8 has been paid up is forfeited, it can be reissued at the
minimum price of:

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(a) ` 10 per share
(b) ` 8 per share
(c) ` 5 per share
(d) ` 2 per share

16. The subscribed share capital of S Ltd. is `1,00,00,000 of `100 each. There were no calls in
arrears till the final call was made. The final call made was paid on 77,500 shares. The
calls in arrears amounted to `6,75,000. The final call on share =?
(a) 25
(b) 30
(c) 20
(d) 50

17. The Journal entry passed when shares are issued to promoters of the company in lieu of
the services provided by them during the incorporation of company is:
(a) Promoters Dr.
To Share capital a/c

(b) Goodwill a/c Dr.

To Share Capital a/c

(c) Misc Expenditure Dr.

To Share Capital

(d) Share Capital Dr.

To Promoters

18. 10,000 equity shares of ` 10 each were issued to public at a premium of ` 2 per share.
Applications were received for 15,000 shares. Amount of securities premium A/c will be :
(a) ` 20,000
(b) ` 30,000
(c) ` 5,000
(d) ` 7,500

19. Pavan Ltd. invited application for 30,000 shares payable as under:
`3 per share on application;
`3 per share on allotment;
`2 per share on First call;
`2 per share on final call;
Ashok, who had been allotted 500 shares failed to pay both the calls. His shares were forfeited
and reissued at `9 per share to Hari, as fully paid up. Amount transferred to capital Reserve
will be _____________
(a) `2,000
(b) `2,500
(c) `2,800
(d) `1,500

20. Mr. X a holder of 20,000 shares for ` 10 each have paid ` 2 on application and `3 on
allotments. He did not pay ` 2 on first call. His shares are forfeited subsequently after first
call. Share capital will be debited by:
(a) ` 2,00,000
(b) ` 1,40,000
(c) ` 1,00,000

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(d) ` 20,000

21. As per the Companies Act, “Interest accrued and not due on Debentures” should be shown:
(a) Under Debentures
(b) As Other Current Liabilities
(c) As Miscellaneous Expenditure
(d) As Current Assets

22. Deep Ltd issued 1,00,000 7% debenture of ` 100 each at a discount of 5% redeemable after
5 years at a premium of 8%. Loss on issue of debentures is:
(a) ` 4,00,000
(b) ` 6,00,000
(c) ` 10,00,000
(d) `13,00,000

23. _____________________specifies the areas in which CSR Expenditure can be done by a

company covered under Section 135 of Companies Act 2013:
(a) III
(b) V
(c) VI
(d) VII

24. The information attached to the balance sheet of a holding company in respect of its
subsidiary companies could not be more than _____________________:
(a) 3 Months
(b) 6 Months
(c) 1 Year
(d) 3 Years

25. Accounting Standard Steering Committee of Britain suggested the inclusion of a value-
added statement (VAS) in ________________.
(a) 1875
(b) 1925
(c) 1975
(d) 1991

26. In cash flow statement, dividend paid in case of financing company is classified as –
(a) Operating activities
(b) Investing activities
(c) Financing activities
(d) Cash and cash equivalents

27. Cash flows from Sales of Fixed Assets is treated as:

(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) Cash Flow from Sales Activities

28. In case there is any conflict between provisions of any applicable Act and Accounting
Standard (AS), the provisions of the ___________shall prevail to that extent:
(a) Act
(b) Accounting Standards
(c) As Central Government may decide
(d) As the Court may decide

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29. ___________________deal with Property Plant & Equipment:
(a) AS 2
(b) AS 6
(c) AS 10
(d) AS 20

30. CGMA stands for:

(a) Complete Global Management Accountants
(b) Certified Global Management Accountants
(c) Corporate Global Management Accountants
(d) Chartered Global Management Accountants

31. The IFRS Advisory Council meets at least ________a year for a period of two days, in
London:
(a) Once
(b) Twice
(c)Three Times
(d) Five Times

32. Ind AS 41 deals with ____________________:

(a) Agriculture
(b) Investment Property
(c) Intangible Assets
(d) Earnings per Share

33. ___________________is also known as “King of All Books”

(a) Journal
(b) Ledger
(c) Trial Balance
(d) Book Keeping

34. As per Ind AS 7, bank overdraft repayable on demand is treated as part of

____________________.
(a) Short Term Borrowings
(b) Other Current Liabilities
(c) Long Term Borrowings
(d) Cash & Cash Equivalents

35. If cost of acquisition of shares in the subsidiary company is less than intrinsic value of the
shares of subsidiary company on the date of acquisition, then resultant figure will be:
(a) Minority Interest
(b) Capital Reserve
(c) Goodwill
(d) Significant cost

36. From the following balances calculate cash from operations :

2016 2017
Bill Receivable 5000 4700
Debtors 1000 1250
Bill Payable 2000 2500
Creditors 800 600
Outstanding Expenses 100 120
Prepaid Expenses 80 70
Accrued Income 60 75
Income received in advance 80 25
Profit made during the year - 7000
(a) 6690
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(b) 7310
(c) 7000
(d) None of above

37. Following details relating to Provision for Tax are available:

Opening balance: 100 Lakhs
Closing Balance: 140 Lakhs
Provision for the year was 1390 Lakhs
Tax paid during the year will be:
(a) 1430 lakhs
(b) 1150 Lakhs
(c) 1350 Lakhs
(d) 1630 Lakhs

38. Arjun Ltd. issued 10,000 (Nos.) of 12% debentures of `100 each in April, 2013. Interest is
payable on 30th September and 31st March every year. The company purchased 2,000
debentures at `104 per debenture on cum-interest basis on 1.7.2014. The own debentures
were cancelled on 30.9.2015. Calculate Cost of Own Debentures.
(a) 2,00,000
(b) 2,06,000
(c) 2,10,000
(d) 2,02,000

39. S Ltd. had issued 1,00,000, 8% Debentures of ` 100 each redeemable on 31st December,
2019 at a premium of 25%. The company offered three options to debenture holders, out
of which one is to convert their holdings into equity shares of ` 10 each at a premium of `
3.50 per share. This offer was accepted by the holders of 54,000 debentures. For this,
number of equity shares issued will be:
(a) 4,38,000
(b) 5,91,300
(c) 5,00,000
(d) 7,98,255

40. H Ltd. is a holding company of S Ltd. During the year 2018-19, Bills Receivable
amounting to ` 3,00,000, out of total bills receivable of ` 5,00,000 received from S Ltd.,
were discounted by H Ltd. and S Ltd. had endorsed to its creditors all the bills received
from H Ltd. amounting to ` 3,00,000. At the end of the year the amount of mutual debtors
will be:
(a) ` 8,00,000
(b) ` 3,00,000
(c) ` 2,00,000
(d) ` 1,00,000

41. As per AS 2, Inventories should be valued at ________________________:

(a) Cost
(b) Net Realizable Value
(c) Lower of A or B
(d) Higher of A or B

42. PQR Ltd. have the following balances:

Investment at the end of the year 2017-18 ` 85,000, Investment at the end of the year 2018-
19 ` 70,000. During the year the company had sold 40% of its original investment at a profit
of 50%. What will be the amount of cash inflow and cash outflow from the investment:
(a) ` 51,000 and ` 36,000
(b) ` 51,000 and ` 19,000
(c) ` 1,21,000 and ` 85,000
(d) ` 1,21,000 and ` 19,000
AMIT TALDA MENTORSHIP THINK CMA, THINK AMIT SIR !
43. A company purchased its own 11% debentures in the open market for `50,00,000 (cum
interest).The interest amount included in the purchase price is `1,50,000. The face value of
the debentures purchased is `52,00,000. The company cancelled the debentures so
purchased. Calculate the profit or loss on cancellation of own debentures.
(a) 1,50,000
(b) 2,00,000
(c) 3,50,000
(d) 50,000

44. If Sinking Fund exists, on cancellation, an amount equal to the nominal value of the
debentures cancelled should be transferred to ____________ from the Debenture Redemption
Fund Account.
(a) Profit & Loss Account
(b) General Reserve Account
(c) Capital Reserve Account
(d) Securities Premium Account

45. Subsidiary can be member of its Holding Company if : (i) When subsidiary is a legal
representative of deceased member of holding Company; (ii) When subsidiary is concerned
in shares as trustee.
(a) Only (i)
(b) Only (ii)
(c) Both of the above
(d) None of the above

46. On 30 June 2017, two-third of the shares of S Ltd. (with a total capital of `48,00,000) was
acquired by H Ltd. the Balance Sheet of S Ltd. showed a debit balance of `24,00,000 on 1st
January 2017 and a credit balance of `14,40,000 on 31 December 2017. The investment by
H Ltd. in shares of S Ltd. is `36,00,000. Calculate the cost of control or capital reserve.
(a) `7,20,000
(b) ` 6,20,000
(c) `3,60,000
(d) `1,80,000

47. The Corporate social Responsibility committee shall consist of __________directors, out of
which atleast ______ director(s) shall be independent director(s).
(a) three or more; two
(b) two or more; one
(c) four or more; two
(d) three or more; one

48. A Ltd. issued 10,000, 10% Debentures of ` 100 each at a discount of 10%. The entire
amount is payable on application. Applications were received for 12,000 debentures. The
amount which should be credited to debenture account will be________.
(a) 12,00,000
(b) 10,00,000
(c) 9,00,000
(d) 10,80,000

49. Own debentures purchased in open market can used for the following:
(a) for immediate cancellation
(b) for investment in the form of own debentures
(c) Both of the above
(d) None of the above

50. Contingent Liabilities must be shown under__________.

(a) Current Liabilities & Provisions
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(b) By way of foot note only
(c) Miscellaneous Expenditure
(d) not shown

51. Wages account is an example of:

(a) Personal account
(b) Real account
(c) Nominal account
(d) None of the above

52. For unlisted companies issuing debentures on private placement basis, the DRR will be
____of the value of outstanding debentures.
(a) 10%
(b) 25%
(c) 40%
(d) 50%

53. On 01.01.2017, Arav Ltd. had outstanding in its books 1,000, 12% debentures of `100
each. The interest is payable on 30th June and 31st December. In accordance with the
deed, the directors acquired in the open market debentures for immediate cancellation as
follows:
1st March 2017- ` 10,000 debentures @ ` 98 (Cum–interest)
1st August 2017- ` 20,000 debentures @ ` 100.25 (Cum-interest)
1st November 2017- ` 5,000 debentures @ ` 98.50 (Ex–interest)
On the basis of above information calculate the amount transferred to Capital Reserve as on
31.12.2017?
(a) 600
(b) 725
(c) 700
(d) 625

54. Which accounting concept treats a business separately from its owner?
(a) Going concern concept
(b) Money measurement concept
(c) Accounting period concept
(d) Accounting entity concept

55. Which of the following results into increase in working capital-

(a) Decrease in current liabilities
(b) Decrease in current assets
(c) Goods sold on credit
(d) Tax paid

56. A company may pay a sitting fee to a director for attending meetings of the Boards or
Committees thereof, such sum as may be decided by the Board of Directors thereof which
shall not exceed `____________ per meeting of the board.
(a) One lakh
(b) Two lakh
(c) Five lakh
(d) Ten lakh

57. Preference shares of a company acquired shortly before their specified redemption date
……………….
(a) Will be shown in investing activities
(b) Will be shown in financing activities
(c) Will be shown in operating activities
(d) Will be shown as cash & cash equivalents
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58. IFRS has a ________________tier governance Structure:
(a) Two
(b) Three
(c) Four
(d) None of above

59. Which of the following is not an objective of Corporate Governance:

(a) Create Transparent Working System
(b) Minimise Wastage
(c) achieving social & economical goals
(d) develop inefficient organization culture

60. Which of the following is/are the disadvantage of Accounting Standards?

(a) Difficult Choice
(b) Mechanical Choice
(c) Not different from Law
(d) All of above

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 PART B
MANAGEMENT ACCOUNTING (40 MARKS)

61. Which of the following is not indirect costs?

(a) Advertising, legal charges, audit fees, bad debts etc.
(b) Cost of making a design, pattern for a specific job
(c) Lighting and heating of office building
(d) Depreciation, repairs and maintenance of plant and machinery

62. Time keeping refers to …………….

(a) Time spent by workers on their job
(b) Time spent by workers in factory
(c) Time spent by workers in keeping machines
(d) Time spent by workers to keep then fit for a job

63. _____________may be defined “as the achievement of real and permanent reduction in the
unit cost of goods manufactured or services rendered without impairing their suitably for
the use intended or diminution in the quality of the product.
(a) Costing
(b) Cost Reduction
(c) Cost Control
(d) All of the above

64. ABC Ltd. calculates the price of product by adding overheads to the prime cost as 20% of
total cost and adding 25% to total costs as a profit margin. The product was sold for `
2,450. Prime cost of the product will be ……………. .
(a) ` 1,470
(b) ` 1,306.67
(c) ` 1,568
(d) ` 2,352

65. …………………………. is based on the premise that every rupee of expenditure requires
justification.
(a) Zero Base Budgeting
(b) Programme Budgeting
(c) Performance Budgeting
(d) Appraisal Budgeting

66. ________________ is prepared by the budget committee on the basis of co-ordinated

functional budgets and becomes the target of the company during the budget period when
it is finally approved.
(a) Sales budget
(b) Flexible budget
(c) The Master Budget
(d) Material budget

The Zed Company, a whole seller estimates the following sales for the indicated months :
Particulars June 2011 ` July 2011 ` August 2011 `
Opening Stock 4,08,000 4,34,400 4,60,800
Credit Sales 15,00,000 16,00,000 17,00,000
Cash Sales 2,00,000 2,10,000 2,20,000
Total Sales 17,00,000 18,10,000 19,20,000

67. Selling price is 125% of the purchase price.

The cost of goods sold for the month of June, 2011 is:
(a) `15,20,000
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 (b) `14,02,500
(c) `12,75,000
(d) `13,33,600

68. Stock purchased in July, 2011 is:

(a) `16,05,000
(b) `14,74,400
(c) `14,40,000
(d) `14,48,000

69. If the sales value of a product is ` 1,99,200 and the profit margin on cost 25%, the amount
of profit will be:
(a) ` 53,120
(b) ` 31,872
(c) ` 49,800
(d) ` 39,840

70. From the following information find out the value of opening stock:
Stock turnover ratio 6 times
Gross profit ratio 20% on sales
Annual sales ` 3,00,000
Closing stock is ` 10,000 more than the opening stock
(a) ` 25,000
(b) ` 30,000
(c) ` 35,000
(d) ` 40,000

71. From the following information, calculate net profit ratio:

1
Gross Profit is th of cost and sales is ` 2,00,000. Indirect expenses is ` 12,000:
4
(a) 19%
(b) 20%
(c) 14%
(d) 25%

72. If Orange Ltd.’s current ratio is 5.5:1, Quick ratio is 4:1 and Inventory is 24,000, its
current liabilities are:
(a) ` 8,000
(b) ` 16,000
(c) ` 30,000
(d) ` 32,000

73. You are given the following information by P Company:

`
Cash 12,00,000
Debtors 3,00,000
Stock 4,00,000
Prepaid Expenses 50,000
Creditors 2,00,000
Bills Payable 50,000
Acid-test ratio is:
(a) 6.2 times
(b) 7.8 times
(c) 7.6 times
(d) 6 times

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74. If average collection period is 15 days and average account receivables is `45,000, the total
amount of credit sales will be (assume 360 days in a year) —
(a) `10,80,000
(b) `16,20,000
(c) `6,75,000
(d) `1,87,500

75. Angle of incidence defines …………

(a) Systematic risk in CAPM model
(b) Post BEP relationship between total cost and total revenue
(c) Incidental factors in investments
(d) Marginal cost of production

76. Statement – I:
Margin of safety represents the difference between sales at break – even point and total sales.

Statement – II:
Margin of safety can be expressed as a percentage of total sales or in value or in terms of
quantity.

Select the correct answer from the options given below –

(a) Both statements are correct
(b) Both statements are incorrect
(c) Statement – I is correct, but Statement – II is incorrect
(d) Statement – I is incorrect, but Statement – II is correct.

77. P/V ratio 25%, Sales `1,20,000 and Fixed costs `17,500, Profit will be :
(a) `12,500
(b) `30,000
(c) `17,500
(d) `20,000

78. If profit, fixed cost and margin of safety are ` 19,20,000; ` 25,60,000 and ` 64,00,000
respectively, then break-even point will be:
(a) ` 44,80,000
(b) ` 85,33,333
(c) ` 38,40,000
(d) ` 48,00,000

79. Manoj. Ltd manufactures three products P,Q,R. The unit selling price of these products are
` 100, ` 160 and ` 75 respectively. The corresponding unit variable cost are `50, ` 80 and
` 30. The proportions (quantity wise) in which these products are manufactured and sold
are 20%, 30% and 50% respectively. Total fixed costs are `14,80,000. Overall break even
quantity is –
(a) 26,195 units
(b) 27,195 units
(c) 27,165 units
(d) 28,165 units

80. Where a market exists outside the firm for the intermediate product and where the market
is competitive, then _______________method is suitable:
(a) Market based transfer pricing
(b) Cost based transfer pricing
(c) Negotiated transfer pricing
(d) Opportunity Cost pricing

81. Under activity-based costing, which activity is considered as ‘Product level activity’?
AMIT TALDA MENTORSHIP THINK CMA, THINK AMIT SIR !
(a) Use of indirect materials
(b) Inspection of products
(c) Keeping technical drawings of products
(d) Production plant security

82. One of company Z’ s cost pool is parts administration. The expected overhead cost for that
cost pool was ` 4,00,000 and the expected activity was 5,000 part types. The actual
overhead cost for the cost pool was ` 6,00,000. The activity rate used to assign costs for
that cost pool was……………
(a) ` 66.67 per part type
(b) ` 80 per part type
(c) ` 100 per part type
(d) ` 120 per part type

83. Following data is obtained from the cost records of Moon Ltd.:
Year Sales (`) Total Cost (`)
2015 1,00,000 80,000
2016 1,20,000 90,000
P/V ratio will be –
(a) 40%
(b) 46%
(c) 52%
(d) 50%

84. _______________________Reports are rendered at periodical intervals:

(a) Routine
(b) Special
(c) Both of above
(d) None of above

85. _______________form of reporting is applied in case of periodical reports covering

production, cost, sales and finance.
(a) Descriptive reporting
(b) Tabular Reports
(c) Graphic Representation
(d) None of above

86. ______________is also known as relative valuation method:

(a) Asset Based method
(b) Income Based Method
(c) Market Based Method
(d) None of above

87. Following information has been extracted from the books of Unique Fashioners Ltd.:
Particulars `
Equity capital 4,00,00,000
12% Debentures 4,00,00,000
18% Term loan 12,00,00,000
20,00,00,000
Applicable tax rate is 40%. Company has been paying 20% dividend per annum constantly.
Compute average cost of capital on book value weights if the current market price of a share of
` 100 is ` 160.
(a) 14.87%
(b) 12.73%
(c) 9.24%
(d) 10.42%

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88. There is a rebuttable presumption that the useful life of an intangible asset will not exceed
________years from the date when the asset is available for use.
(a) 5
(b) 10
(c) 15
(d) 20

89. Compute the amount of goodwill based on 3 years purchase of super profit from the
following: Future maintainable profit after tax: `15,00,000; Normal pre-tax rate of return:
20%; Capital employed: `60,00,000; Tax rate: 30%
(a) `12,30,000
(b) `21,40,000
(c) `19,80,000
(d) `14,70,000

90. Accounting for Share Based Payments is covered in ____________________:

(a) IND AS 101
(b) IND AS 102
(c) IND AS 103
(d) IND AS 104

91. If expected return is more than required return as per CAPM, then –
(a) Security is overvalued and hence can be bought
(b) Security is correctly priced and hence should be hold
(c) Security is undervalued and hence can be sold
(d) Security is undervalued and hence can be bought

92. Risk free rate is 10%. Market Return is 15%. Beta is 1.2 Times. What will be the expected
return from this Investment?
(a) 10%
(b) 12%
(c) 15%
(d) 16%

93. In an efficiently diversified portfolio, i.e., Market Portfolio, there is no _____________:

(a) Systematic Risk
(b) Unsystematic Risk
(c) Total Risk
(d) All of the above

94. Which of the following is not considered in Asset Based Valuation?

(a) Intangible Assets
(b) Unrecorded Assets
(c) Fictitious Assets
(d) Both B & C

95. Which of the following Sections of the Companies Act, 2013 deals with the audit of Cost
Accounting Records?
(a) Section 128
(b) Section 145
(c) Section 147
(d) Section 148

96. Cost of Goods Sold is `60 Lakh, Purchases are `72 Lakh and Closing Stock is `18 Lakh,
then Stock Turnover Ratio will be:
(a) 5 times
(b) 6 times
AMIT TALDA MENTORSHIP THINK CMA, THINK AMIT SIR !
(c) 6.4 times
(d) 4.29 times

97. Reliable Ltd. has given the following data :

Budget Production = 600 Units
Standard hours per unit = 20
Actual production = 550 units
Actual Working = 10,000 hours
What is the Efficiency Ratio?
(a) 110%
(b) 120%
(c) 100%
(d) 125%

98. Current ratio is 2.5:1 and Liquid ratio is 1:1. Stock is ` 60,000. Calculate Current liability
(a) ` 40,000
(b) ` 60,000
(c) ` 1,00,000
(d) Cannot be determined

99. Following is NOT an objective of Activity based costing (ABC):

(a) Activity based costing is a two stage product costing method.
(b) The cost pools in the two-stage approach now accumulate product related cost.
(c) It is based on the concept that products consume activities and activities consume
resources.
(d) None of the above

100. X purchased business from Y on 30th June, 2017. Profit earned by Y for the preceding
years ending on 31st December every year were- 2014 – ` 41,000, 2015-` 40,000 and
2016 – ` 42,000.
It was ascertained that profits of 2015 included a non- recurring item of ` 1500 and profit of
2016 was reduced by ` 2000 due to an extraordinary loss on account of theft. The annual
premium was ` 200 per annum. X at the time of purchasing the business, was employed with
Rama Bros and was getting ` 500 p.m. he intends to replace the manager who at the present
is getting ` 350 p.m. the goodwill is calculated at 2 years purchase of the average profits.
Calculate the goodwill of the business.
(a) ` 84,000
(b) ` 78,334
(c) ` 75,455
(d) ` 85,445

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