Page No 3.34:
Question 36:
Ayub and Amit
are partners in a firm and they admit Jaspal into
partnership w.e.f. 1st
April, 2019. They agreed to value goodwill at 3 years' purchase of Super Profit
Method for which they decided to average profit of last 5 years. The profits
for the last 5 years were:
Year Ended |
Net Profit ( `) |
|
31st March, 2015 |
1,50,000 |
|
31st March, 2016 |
1,80,000 |
|
31st March, 2017 |
1,00,000 |
(Including abnormal loss of `
1,00,000) |
31st March, 2018 |
2,60,000 |
(Including abnormal gain (profit)
of ` 40,000) |
31st March, 2019 |
2,40,000 |
|
The firm has total assets of ` 20,00,000 and Outside
Liabilities of ` 5,00,000
as on that date. Normal Rate of Return in similar business is 10%.
Calculate value of goodwill.
Answer:
Goodwill |
=Super Profit×No. of Years' Purchase =48,000×3= ` 1,44,000 |
Working Notes:
WN: 1 Calculation of Normal
Profits:
Year |
Profit/(Loss) (
`) |
Adjustment |
Normal Profit ( `) |
31 March, 2015 |
1,50,000 |
- |
1,50,000 |
31 March, 2016 |
1,80,000 |
- |
1,80,000 |
31 March, 2017 |
1,00,000 |
1,00,000 |
2,00,000 |
31 March, 2018 |
2,60,000 |
(40.000) |
2,20,000 |
31 March, 2019 |
2,40,000 |
- |
2,40,000 |
|
|
Total Profit |
9,90,000 |
WN2: Calculation of
Super Profits
Average
profit = total profit of past given years / number of years
Average
profit =9,90,000/5=1,98,000
Normal profit = Capital
employed×Rate of return/100
=
15,00,000×10/100=1,50,000
Super
profit = Actual profit - Normal profit
= 1,98,000 – 1,50,000=48,000
WN3: Calculation of
Capital Employed
Capital Employed |
=Total Assets-Outside Liabilities =20,00,000-5,00,000=
`15,00,000 |
Page No 3.34:
Question 37:
From the following
information, calculate value of goodwill of the firm by applying Capitalisation Method: Total Capital of the firm ` 16,00,000.
Normal rate of return 10%. Profit for the year ` 2,00,000.
Answer:
Goodwill= Capitalised value –
Actual capital
Capitalised value of goodwill=
profit ×100/ Normal rate of return
Capitalised value of goodwill=
2,00,000×100/ 10=20,00,000
Total Capital = ` 16,00,000
Goodwill=20,00,000-16,00,000=4,00,000
Page No 3.34:
Question 38:
A business has
earned average profit of ` 1,00,000 during the last few
years. Find out the value of goodwill by capitalisation
method, given that the assets of the business are `
10,00,000 and its external liabilities are ` 1,80,000. The normal rate of return is 10%.
Answer:
Goodwill=Capitalised Value of Average Profits-Actual Capital EmployedCapitalised Value of Average Profit=Average Profit×100Nominal Rate of Return=1,00,000×10010=10,00,000Actual Capital Employed=10,00,000-1,80,000=8,20,000Goodwill=10,00,000-8,20,000= ` 1,80,000
Page No 3.35:
Question 39:
Form the following
particulars, calculate value of goodwill of a firm by applying Capitalisation of Average Profit Method:
(i) Profits of last five consecutive years ending
31st March are: 2019 − ` 54,000; 2018 − ` 42,000; 2017 − ` 39,000; 2016 − ` 67,000 and 2015 − ` 59,000.
(ii) Capitalisation rate 20%.
(iii) Net assets of the firm ` 2,00,000.
Answer:
Goodwill Average profit |
= Capitalised value – Actual
capital
=Average profit = total
profit of past given years/number of years
=54,000+42,000+39,000+67,000+59,000/5 =52,200 |
Capitalised value of goodwill |
= Average profit ×100/ Normal rate of return =52,200 ×100/20 =2,61,000 |
Goodwill |
= Capitalised value – Actual
capital
=2,61,000-2,00,000 =61,000 |
Page No 3.35:
Question 40:
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.
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
Click on below link More Questions Of chapter- 3: Goodwill: Nature and Valuation | 2019