12th | Ts grewal 2022-2023 Question 26 to 30 | Goodwill: Nature and Valuation

Question 26:


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

Answer:


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.

Answer:


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

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)

Answer:


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.

Answer:


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: 2022 −
 `54,000; 2021 −  `42,000; 2020 −  `39,000; 2019 −  `67,000 and 2018 −  `59,000.
(ii) Capitalisation rate 20%.
(iii) Net assets of the firm
` 2,00,000.

Answer:


Goodwill

Average profit

 

 

 

= Capitalised value – Actual capital

=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