Double
Entry Book Keeping Ts Grewal Volume 1 2021-2022
Solutions
for Class 12 Commerce Accountancy
Chapter
3 - Goodwill: Nature And Valuation
Page No 3.33:
Question
36:
Rajan and Rajani are partners in a firm. Their capitals were Rajan ` 3,00,000; Rajani ` 2,00,000. During the year 31st March, 2021, the firm earned a profit of ` 1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20%.
Answer:
Goodwill=Super Profits×100÷Nominal Rate of Return
Super Profits=Average Profit-Normal Profit
Average Profit=
`1,50,000
(Given)Normal Profit=Capital Employed×Normal Rate of Return
Normal Profit=(3,00,000+2,00,000)×20%=
`1,00,000
Super Profit=1,50,000-1,00,000=
`50,000
Goodwill=50,000×100÷20=
` 2,50,000
Page No 3.33:
Question
37:
Average profit of GS & Co. is ` 50,000 per year.
Average capital employed in the business is `3,00,000. If the
normal rate of return on capital employed is 10%, calculate goodwill of the
firm by:
(i) Super Profit Method at three years' purchase; and
(ii) Capitalisation of Super Profit Method.
Answer:
|
(i) Goodwill |
=Super Profit
× No. of Years' Purchase
=20,000×3= ` 60,000
|
|
(ii) Goodwill |
=Super Profit×100÷Normal Rate of Return
=20,000×100÷10
= ` 2,00,000
|
Working Notes:
WN1: Calculation
of Super Profits
Average Profit=Total Profits for past given years÷No. of Years
= ` 50,000
Normal Profit=Capital Employed×Normal Rate of Return÷100
=3,00,000×10÷100= ` 30,000
Super Profit=Average Profit-Normal Profit
=50,000-30,000= ` 20,000
Page No 3.33:
Question
38:
A business has earned average profit of ` 8,00,000
during the last few years and the normal rate of return in similar business is
10%. Find value of goodwill by:
(i) Capitalisation of Super Profit Method; and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of
super profit.
Assets of the business
were ` 80,00,000 and its external liabilities ` 14,40,000.
Answer:
Capital Employed=Total Assets - External Liabilities
=
`(80,00,000-14,40,000)=
`65,60,000
Normal Profits=Capital Employed
× Normal Rate of Return÷100
=
`65,60,000×10÷100=
`6,56,000
Average Profits=
`8,00,000
Super Profits=Average Profits - Normal Profits
= `(8,00,000 - 6,56,000)=
`1,44,000
(i)As per Capitalisation of Super Profit method,Goodwill=Super Profit×100÷Normal Rate of Return
= `1,44,000×100÷10= `14,40,000 (ii)As per Super Profit method,Goodwill=Super Profit × No. of years of purchase
=
`(1,44,000×3)=
`4,32,000
Page No 3.33:
Question 39:
From the following information, calculate
value of goodwill of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average profit.
Information:
(a) Average Capital Employed is ` 6,00,000.
(b) Net Profit÷(Loss) of the firm for the last three years ended are:
31st March, 2021 − ` 2,00,000, 31st March, 2020 − ` 1,80,000, and 31st March,
2019 − ` 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of ` 1,00,000 to partners is to be taken as
charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade
investments) is ` 7,00,000 whereas Partners' Capital is ` 6,00,000 and Outside
Liabilities ` 1,00,000.
Answer:
(i) Goodwill
|
=Average Profit×No. of years' purchase
=80,000×3= ` 2,40,000
|
(ii) Goodwill
|
=Super Profit×No. of years' purchase
=20,000×3= ` 60,000
|
(iii) Goodwill
|
=Super Profit×100÷Normal Rate of Return
=20,000×100÷10= ` 2,00,000
|
(iv) Goodwill
|
=Capitalised Value-Net Assets
=8,00,000-6,00,000= ` 2,00,000
|
Working Notes:
WN1: Calculation
of Average and Super Profits
Average Profit=Total Profits of past years given÷No. of Years
=2,00,000+1,80,000+1,60,000÷3
= ` 1,80,000,
Average Profit (Adjusted) = ` 1,80,000 - 1,00,000 (Remuneration to partners)
= ` 80,000Normal Profit=Capital Employed×Normal Rate of Return÷100
=6,00,000×10÷100= ` 60,000
Super Profit=Average Profit (Adjusted)-Normal Profit
=80,000-60,000= ` 20,000
WN2:
Calculation
of Capital Employed
Capital Employed=Total Assets-Outside Liabilities
=7,00,000-1,00,000
= ` 6,00,000
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