Question
31:
A business has earned average profit of `4,00,000
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 profits.
Assets of the business were
`40,00,000 and its external
liabilities ` 7,20,000. (Delhi, 2013 C)
Answer:
Average Profit – ` 4,00,000
Normal Rate of Return – 10%
(i)
Goodwill by Capitalisation of Super profit
|
goodwill |
=super profit ×100/ normal rate of return |
|
Capital employed |
= assets – external liabilities =40,00,000-7,20,000 |
|
Normal profit |
= Capital employed×Normal rate of return/100 =32,80,000×10/100 |
|
Super |
Profit = Actual Profit
– Normal Profit = ` 72,000 |
|
Goodwill |
=72,000×100/10 = `
7,20,000 |
(ii) Super Profit Method if the
goodwill is valued at 3 years’ purchase of super profits
|
Goodwill |
= Super Profit ×Purchases =72,000×3 =2,16,000 |
Therefore, Goodwill is valued at ` 2,16,000
Question 32: A firm earns profit of `5,00,000. Normal Rate of Return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders' liabilities as on the date of goodwill are `55,00,000 and `14,00,000 respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.
Answer;
Capitalised
value of average profit =500,000×100/10=50,00,000
Actual
capital employed= Assets – liabilities
=50,00,000-41,00,000
=9,00,000
Normal
profit = 41,00,000×10/100
Super
profit=5,00,000-4,10,000=90,000
Value
of goodwill under super profit method
=90,000×100/10=9,00,000
Question
33:
On 1st April, 2018, a firm had assets of ` 1,00,000 excluding stock
of ` 20,000. The current liabilities were ` 10,000 and the balance
constituted Partners' Capital Accounts. If the normal rate of return is 8%, the
Goodwill of the firm is valued of ` 60,000 at four years'
purchase of super profit, find the actual profits of the firm. (CBSE Sample paper, 2018)
Answer:
Total Assets of the firm=(Sundry Assets + Stock)=
`(1,00,000+20,000)=
`1,20,000
Current Liabilities of the firm=
`10,000
Capital Employed=(Total Assets - Current Liabilities)=
`(1,20,000 - 10,000)=
`1,10,000
Normal Profits=Capital Employed
× Normal Rate of Return/100= `1,10,000×8/100= `8,800
Goodwill = Super Profits × No. of years of purchase
60,000=
Super Profits × 4
Super Profits=
`60,000/4=
`15,000
Super Profits= Average Actual Profits - Normal Profits
15,000=Average Actual Profits - 8,800
Average Actual Profits=
`(15,000+8,800)=
`23,800
Question 34: Average profit of a firm during the last few years is `1,50,000. In similar business, the normal rate of return is 10% of the capital employed. Calculate the value of goodwill by capitalisation of super profit method if super profits of the firm are `50,000. (CBSE 2020)