State whether the following statements are true or false
i) Goodwill is a tangible asset.
a) Goodwill is not recorded in the books of accounts, generally.
b) The capacity of a business to earn profit at the current accounting period is termed as goodwill.
c) When evaluating goodwill, income from non-trading assets should be excluded.
d) Profitability is one of the main factors that affect the value of goodwill. Here, profit refers to the past year’s profit earned by the firm.
e) While computing capital employed, all current liabilities should be excluded.
f) Fictitious assets should be included, when capital employed is computed.
g) Provision for taxation, if it appears in the balance sheet, should be treated as a part of profit for the purpose of computing (average) capital employed.
h) The value of goodwill is directly proportionate to the amount of capital employed.
i) Weighted average method can be used to calculate future maintainable profit, if the trend is increase in profit every year.
j) Normal rate of return is the rate of profit generally earned by other similar firms in that industry.
k) By the use of capitalization of super profit method, the value of goodwill will be maximum.
l) While valuing the intrinsic value of shares, investment should be valued at their book value.
m) The value of shares of a company is affected by proportion of liabilities and the capital.
n) Provision for bad and doubtful debts should not be taken into consideration while valuing the assets in ascertaining the intrinsic value of shares.
o) In case the preference shares are participating preference shares, their claim for surplus should not be deducted from the value of the assets In case of partly paid-up and fully paid-up shares, it is imperative to convert partly paid-up shares into fully paid-up shares by making a notional call.
p) Fair value of share is not connected with intrinsic value and yield value of shares.
q) When only a few shares are to be sold, profits for the past few years are to be determined, from which expected rate of return is computed.
r) Another name of intrinsic value method is asset backing method.