# Chapter 3 - Goodwill: Nature And Valuation

#### Question 26:

From the following information, calculate value of goodwill of the firm by applying Capitalization Method: Total Capital of the firm `16,00,000.
Normal rate of return 10%. Profit for the year  `2,00,000.

Goodwill= Capitalised value – Actual capital

Capitalised value of goodwill= profit ×100/ Normal rate of return

Capitalised value of goodwill= 2,00,000×100/ 10=20,00,000

Total Capital = ` 16,00,000

Goodwill=20,00,000-16,00,000=4,00,000

#### Question 27:

A firm earns average profit of ` 3,00,000 during the last few years. The Normal Rate of Return of the industry is 15%. The assets of the business were ` 17,00,000 and its liabilities were ` 2,00,000.

Calculate the goodwill of the firm by Capitalisation of Average Profit Method.

Calculation of Goodwill by Capitalisation of Average Profit Method

 Goodwill = Capitalised Value of Profit – Actual capital employed Capitalised value of profit = Actual profit×100/normal rate of return = 3,00,000×100/15 = 20,00,000 Capital employed = Assets- external liabilities = 30,00,000-15,00,000 = 15,00,000 Goodwill = 20,00,000-15,00,000 = 5,00,000

#### Page No 3.32:

Question 28: A and B were partners in a firm with capitals of `3,00,000 and `2,00,000 respectively. The normal rate of return was 20% and the capitalised value of average profits was `7,50,000. Calculate goodwill of the firm by capitalisation of average profits method. (CBSE 2020 C)

Total Actual Capital Employed by A and B is `3,00,000 + `2,00,000= `5,00,000

capitalised value of average profits = `7,50,000

 Goodwill = Capitalised Value – Capital Employed = 7,50,000 - 5,00,000 Goodwill = 2,50,000

#### Question 29: Puneet and Tarun are in restaurant business having credit balances in their fixed Capital Accounts as `2,50,000 each. They have credit balances in their Current Accounts of `30,000 and `20,000 respectively. The firm does not have any liability. They are regularly earning profits and their average profit of last 5 years is `1,00,000. if the normal rate of return is 10%, find the value of goodwill by Capitalisation of Average Profit Method.

Total Actual Capital Employed = 2,50,000+2,50,000+30,000+20,000

=5,50,000

Capitalised Value of Average profit= Average Profit×100/Rate of Return

= 1,00,000×100/10

=10,00,000

 Goodwill = Capitalised Value – Capital Employed = 10,00,000 - 5,50,000 Goodwill = 4,50,000

#### Question 30:

Form the following particulars, calculate value of goodwill of a firm by applying Capitalisation of Average Profit Method:
(i) Profits of last five consecutive years ending 31st March are: 2021 −
`54,000; 2020 −  `42,000; 2019 −  `39,000; 2018 −  `67,000 and 2017 −  `59,000.
(ii) Capitalisation rate 20%.
(iii) Net assets of the firm
` 2,00,000.

Goodwill

Average profit

#### =Average profit = total profit of past given years/number of years

=54,000+42,000+39,000+67,000+59,000/5

=52,200

Capitalised value of goodwill

= Average profit ×100/ Normal rate of return

=52,200 ×100/20

=2,61,000

Goodwill

#### = Capitalised value – Actual capital

=2,61,000-2,00,000

=61,000

Click on Below link for more questions Of Volume-1 of 12th

## Chapter-3: Goodwill: Nature and Valuation | 2021-2022

From Question No. 1 to 5

From Question No. 6 to 10

From Question No. 11 to 15

From Question No. 16 to 20

From Question No. 21 to 25

From Question No. 26 to 30

From Question No. 31 to 35

From Question No. 36 to 39