# Volume-1 | Chapter- 3 | | Question: 31 to 35 | Ts grewal solution 2019-20 | Class-12th

#### Question 31:

Capital of the firm of Sharma and Verma is  ` 2,00,000 and the market rate of interest is 15%. Annual salary to partners is  ` 12,000 each. The profits for the last three years were  ` 60,000;  ` 72,000 and  ` 84,000. Goodwill is to be valued at 2 years' purchase of last 3 years' average super profit.
Calculate goodwill of the firm.

Goodwill= Super profit × no. of purchases years’

Normal profit = Capital employed×Rate of return/100

Normal profit = 2,00,000×15/100=30,000

 Year Profit before Partner’s Salary – Partner’s Salary = Actual Profit after Salary 1 60,000 – 24,000 = 36,000 2 72,000 – 24,000 = 48,000 3 84,000 – 24,000 = 60,000

Average Actual profit after salary to partners = 36,000+48,000+60,000/3=48,000

Super profit = Actual profit - Normal profit=48,000-30,000=18,000

Number of years’ purchase = 2

Goodwill= Super profit × no. of purchases years’

Goodwill=  18,000×2 =36,000

#### Question 32:

Supreet and Shubham are equal partners. They decide to admit Akriti for 1/3rd share. For the purpose of admission of Akriti, goodwill of the firm is to be valued at four years' purchase of super profit. Average capital employed in the firm is  ` 1,50,000. Normal rate of return may be taken as 15% p.a. Average profit of the firm is  ` 40,000. Calculate value of goodwill.

Average Profit of the firm= `40,000Capital Employed= `1,50,000Normal Profit=Capital Employed×Normal Rate of Return100= `1,50,000×15100= `22,500Super Profits= Average Profits-Normal Profits= `(40,000 - 22,500)= `17,500Goodwill=Super Profits× No. of years of purchase= `(17,500×4)= `70,000

#### Question 33:

On 1st April, 2019, an existing firm had assets of  ` 75,000 including cash of  ` 5,000. Its creditors amounted to  ` 5,000 on that date. The firm had a Reserve of  ` 10,000 while Partners' Capital Accounts showed a balance of  ` 60,000. If Normal Rate of Return is 20% and goodwill of the firm is valued at  ` 24,000 at four years' purchase of super profit, find average profit per year of the existing firm.

Average profit = total profit of past given years/number of years

Capital Employed = Total Assets - Creditors

= 75,000 5,000 =  ` 70,000

Goodwill of the firm =  ` 24,000

Number of years’ purchase = 4

Goodwill= Super profit × no. of purchases years’

Or, 24,000 = Super Profit / 4

=24,000/ 4

=6,000

Average profit = Normal profit+ Super profit

20,000=14,000+6,000

#### Question 34:

Average profit earned by a firm is  ` 1,00,000 which includes undervaluation of stock of  ` 40,000 on an average basis. The capital invested in the business is  ` 6,30,000 and the normal rate of return is 5%. Calculate goodwill of the firm on the basis of 5 times the super profit.

Average normal profit= (Average Profit + Undervaluation of stock on average basis*)

Average normal profit = `(1,00,000+40,000)= `1,40,000

Capital Employed in the business= `6,30,000

Normal Profits=Capital Employed×Normal Rate of Return100= `6,30,000×5100= `31,500

Super Profits=Average Normal Profits - Normal Profits= `(1,40,000-31,500)= `1,08,500

Goodwill=Super Profits × No. of years of purchase= `(1,08,500×5)= `5,42,500

*Stock has been taken to be closing stock if nothing is specified in the question

#### Question 35:

Average profit earned by a firm is  ` 7,50,000 which includes overvaluation of stock of  ` 30,000 on an average basis. The capital invested in the business is  ` 42,00,000 and the normal tare of return is 15%. Calculate goodwill of the firm on the basis of 3 time the super profit.

Average Profit earned by a firm =  ` 7,50,000
Overvaluation of Stock =
` 30,000
Average Actual Profit = Average Profit earned by a firm – Overvaluation of Stock
or, Average Actual Profit = 7,50,000 – 30,000 =
` 7,20,000

Normal profit = Capital employed×Rate of return/100

Normal profit = 42,00,000×15/6,30,000

Super Profit = Actual Average Profit – Normal Profit
or, Super Profit = 7,20,000 – 6,30,000 =
` 90,000
Goodwill = Super Profit × Number of Times
Goodwill = 90,000 × 3 =
` 2,70,000