Question : Assertion (A): An older business is likely to have lesser goodwill. Reason (R): The number of customers of an older business will be more in comparison to the customers of new entrants.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion
Option 3: Assertion (A) is true but Reason (R) is false
Option 4: Assertion (A) is false but Reason (R) is true
Correct Answer: Assertion (A) is false but Reason (R) is true
Solution : An older business is likely to have greater goodwill and the number of customers of an older business will be more in comparison to the customers of new entrants. Hence, the correct option is 4.
Question : Assertion (A): A new business is likely to have lesser goodwill. Reason (R): Goodwill is an intangible asset.
Question : Assertion (A): Goodwill requires adjustment at the time of reconstitution of a firm. Reason (R): The nature and location of business do not affect the valuation of goodwill.
Question : Assertion (A): Goodwill belongs to the category of intangible assets such as patents, trademarks, copy rights, etc. Reason (R): Goodwill cannot be seen or touched.
Question : Assertion (A): Purchased goodwill means goodwill for which a consideration has been paid. Reason (R): It is shown in Balance Sheet as a liability.
Question : Assertion (A): Over a period of time, a well-established business develops an advantage of good name, reputation and wide business connections. Reason (R): Self-generated goodwill is shown as an asset in the books.
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