Page No 3.32:
Question 26:
A partnership firm earned net profits during the last three years ended 31st
March, as follows: 2017 − ` 17,000; 2018 − `
20,000; 2019 − ` 23,000.
The capital investment in the firm throughout the above-mentioned period has been ` 80,000. Having regard to the
risk involved, 15% is considered to be a fair return on the capital. Calculate
value of goodwill on the basis of two years' purchase of average super profit
earned during the above-mentioned three years.
Answer:
Goodwill=
Super profit × no. of purchases years’
Average profit = total profit of past given
years/number of years
Average Actual profit =17,000+20,000+20,000/3=20000
Normal
profit = Capital employed×Rate of return/100
Normal
profit = 20,000×15/100=12,000
Super profit = Actual profit - Normal profit
Super profit = 20,000 – 12,000=8,000
Number of years’ purchase = 2
Goodwill=
8,000 × 2=16,000
Page No 3.32:
Question 27:
A partnership firm earned net profits during the past three years as follows:
|
Year ended |
31st March, 2019 |
31st March, 2018 |
31st March, 2017 |
|
Net Profit (
`) |
2,30,000 |
2,00,000 |
1,70,000 |
Capital
investment in the firm throughout the above-mentioned period has been ` 4,00,000. Having regard to the
risk involved, 15% is considered to be a fair return on the capital. The
remuneration of the partners during this period is estimated to be ` 1,00,000 p.a.
Calculate value of goodwill on the basis of two years' purchase of average
super profit earned during the above-mentioned three years.
Answer:
Goodwill=
Super profit × no. of purchases years’
Normal
profit = Capital employed×Rate of return/100
Normal profit = 4,00,000×15/100=60,000
|
Year |
Profit before Partners’ Remuneration |
– |
Partners’ Remuneration |
= |
Actual Profit after Remuneration |
|
2017 |
1,70,000 |
– |
1,00,000 |
= |
70,000 |
|
2018 |
2,00,000 |
– |
1,00,000 |
= |
1,00,000 |
|
2019 |
2,30,000 |
– |
1,00,000 |
= |
1,30,000 |
Average Actual profit = total profit of past
given years/number of years
Average actual profit after remuneration
=70,000+1,00,000+1,30,000/3=1,00,000
Super profit = 1,00,000 – 60,000=40,000
Number of years’ purchase = 2
Goodwill=40,000×2=80,000
Page No 3.33:
Question 28:
Ideal Marketing earned an average profit of ` 4,00,000 during the last five years. Normal rate of return on capital employed is 10%. Balance Sheet of the firm as at 31st March, 2019 was as follows:
|
|
||||
|
Liabilities |
Amount |
Assets |
Amount |
|
|
Capital
A/cs: |
|
|
Land
and Building |
10,00,000 |
|
Shyam |
5,00,000 |
|
Furniture |
2,00,000 |
|
Sunder |
5,00,000 |
10,00,000 |
Investments |
1,00,000 |
|
Current
A/cs: |
|
Sundry
Debtors |
5,00,000 |
|
|
Shyam |
2,00,000 |
|
Bills
Receivable |
50,000 |
|
Sunder |
2,00,000 |
4,00,000 |
Closing
Stock |
3,00,000 |
|
Reserves |
3,40,000 |
Cash
in Hand |
50,000 |
|
|
Sundry
Creditors |
4,00,000 |
Cash
at Bank |
1,00,000 |
|
|
Bills
Payable |
1,00,000 |
|
|
|
|
Outstanding
Expenses |
60,000 |
|
|
|
|
|
23,00,000 |
23,00,000 |
||
|
|
|
|
|
|
Calculate the value of goodwill, if it is valued at three years' purchase of
Super Profits.
Answer:
Average Profits= `4,00,000
Capital Employed=Total Assets - Non-Trade Investments- Outside Liabilities= `(23,00,000-1,00,000-5,60,000)= `16,40,000
Normal Profits=Capital Employed×Normal Rate of Return100= `16,40,000×10100= `1,64,000
Super Profits=Average Profits-Normal Profits= `(4,00,000-1,64,000)= `2,36,000
Goodwill=Super Profits × No. of years of Purchase= `(2,36,000×3)= `7,08,000
Page No 3.33:
Question 29:
Varuna and Karuna are partners for equal shares. They admit Lata into partnership for 1/4th share. It was agreed to value goodwill of the firm at 4 years' purchase of super profit. Normal rate of return is 15% of the capital employed. Average profit of the firm is ` 4,00,000. Balance Sheet of the firm as at 31st March, 2019 was as follows:
|
|
||||
|
Liabilities |
Amount |
Assets |
Amount |
|
|
Capital
A/cs: |
|
|
Furniture |
4,00,000 |
|
Varuna |
5,00,000 |
|
Computers |
3,00,000 |
|
Karuna |
5,00,000 |
10,00,000 |
Electrical
Fittings |
1,00,000 |
|
Long-term
Loan |
5,50,000 |
Investments
(Trade) |
2,00,000 |
|
|
Sundry
Creditors |
2,00,000 |
Stock |
3,00,000 |
|
|
Outstanding
Expenses |
50,000 |
Sundry
Debtors |
3,00,000 |
|
|
Advances
from Customers |
1,50,000 |
Bills
Receivable |
50,000 |
|
|
|
|
Cash
in Hand |
50,000 |
|
|
|
|
Cash
at Bank |
2,00,000 |
|
|
|
|
Deferred
Revenue Expenditure: |
|
|
|
|
|
Advertisement
Suspense |
50,000 |
|
|
|
19,50,000 |
|
19,50,000 |
|
|
|
|
|
|
|
Calculate
the value of goodwill.
Answer:
Average Profits= `4,00,000Capital Employed=Total Assets-Fictitious Assets-Current Liabilities= `(19,50,000-50,000-4,00,000)= `15,00,000Normal Profits=Capital Employed×Normal Rate of Return100= `15,00,000×15100= `2,25,000Super Profits=Average Profits - Normal Profits= `(4,00,000-2,25,000)= `1,75,000Goodwill=Super Profits×No. of Years of Purchase= `(1,75,000×4)= `7,00,000
Page No 3.33:
Question 30:
A business earned an average profit of ` 8,00,000 during the last few years. The normal rate of profit in the similar type of business is 10%. The total value of assets and liabilities of the business were ` 22,00,000 and ` 5,60,000 respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at212 years' purchase of super profits.
Answer:
Average profit =80,000
Normal profit = Capital employed×Rate of
return/100
Normal profit = 16,40,000×10/100=1,64,000
Capital employed = total assests- Outside liabilities
Capital employed = 22,00,000- 5,60,000=16,40,000
Super profit = Actual profit - Normal profit
Super profit =8,00,000-1,64,000=6,36,000
Goodwill= Super profit × no. of purchases
years’
Number of years’ purchase = 2.5
Goodwill= 6,36,000×2.5 =15,90,000
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