# Volume-1 | Chapter- 3 | | Question: 21 to 25 | Ts grewal solution 2019-20 | Class-12th

#### 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.

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

#### 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.

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

#### 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.

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

#### 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.

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

#### 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.

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