Page No 3.32:
Question 21:
Average profit earned by a firm is ` 80,000 which includes undervaluation of stock of ` 8,000 on an average basis. The capital invested in the business is ` 8,00,000 and the normal rate of return is 8%. Calculate goodwill of the firm on the basis of 7 times the super profit.
Answer:
Average Normal Profits of the firm=(Average Profits + Undervaluation of Stock)= `(80,000+8,000)= `88,000
Normal Profits= `Capital Employed×Normal Rate of Return100= `8,00,000×8100= `64,000
Super Profits=Average Profits-Normal Profits= `(88,000-64,000)= `24,000
Goodwill= Super Profits × No. of years of Purchase= `(24,000×7)= `1,68,000
Page No 3.32:
Question 22:
Gupta and Bose had a firm in which they had invested ` 50,000. On an average, the profits were ` 16,000. The normal rate of return in the industry is 15%. Goodwill is to be valued at four years' purchase of profits in excess of profits @ 15% on the money invested. Calculate the value goodwill.
Answer:
Goodwill= Super profit × no. of purchases
years’
Normal profit = Capital employed×Rate of
return/100
Normal profit = 50,000×15/100=7,500
Actual profit =16,000
Super profit = Actual profit - Normal profit
Super profit = 16,000 – 7,500=8,500
Number of years’ purchase = 4
Goodwill =8,500×4=34,000
Page No 3.32:
Question 23:
The total capital of the firm of Sakshi, Mehak and Megha is ` 1,00,000 and the market rate of interest is 15%. The net profits for the last 3 years were ` 30,000; ` 36,000 and ` 42,000. Goodwill is to be valued at 2 years' purchase of the last 3 years' super profits. Calculate the goodwill of the firm.
Answer:
Goodwill=Super Profit×Number of Years' Purchase
Super Profits = Average Profit - Normal Profit
Average Profits = Total ProfitsNumber of Years=30,000+36,000+42,0003= ` 36,000
Normal Profits = Capital Employed × Normal Rate of Return=1,00,000×15100=15,000
Super Profits=36,000-15,000=21,000
Goodwill=21,000×2= ` 42,000
Page No 3.32:
Question 24:
Rakesh and Ashok earned a profit of ` 5,000. They employed capital of ‹ ` 25,000 in the firm. It is expected that the normal rate of return is 15% of the capital. Calculate amount of goodwill if goodwill is valued at three years' purchase of super profit.
Answer:
Actual Profits of the firm= `5,000Normal Profits=Capital Employed×Normal Rate of Return100= `25,000×15100= `3,750Super Profits=Actual Profits - Normal Profits= `(5,000 - 3,750)= `1,250Goodwill=Super Profits × No. of years of Purchase= `(1,250 × 3)= `3,750
Page No 3.32:
Question 25:
Average net profit expected in future by XYZ firm is ` 36,000 per year. Average capital employed in the business by the firm is ` 2,00,000. The normal rate of return from capital invested in this class of business is 10%. Remuneration of the partners is estimated to be ` 6,000 p.a. Calculate the value of goodwill on the basis of two years' purchase of super profit.
Answer:
Goodwill= Super profit × no. of purchases
years’
Normal profit = Capital employed×Rate of
return/100
Normal profit = 2,00,000×10/100=20,000
Actual exceeded profit =30,000-6000=30,000
Super profit = Actual profit - Normal profit
Super profit = 30,000 – 20,000=10,000
Number of years’ purchase = 2
Goodwill =10,000×2=20,000
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