# Volume-1 | Chapter- 3 | | Question: 41 to 45 | Ts grewal solution 2019-20 | Class-12th

#### Question 41:

A firm earns profit of  ` 5,00,000. Normal Rate of Return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders' liabilities as on the date of goodwill are  ` 55,00,000 and  ` 14,00,000 respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.

(i)Calculation of Goodwill by Capitalisation of Super Profit Method

 goodwill =super profit ×100/ normal rate of return Capital employed = assets – external liabilities =55,00,000-14,00,000 =41,00,000 Normal profit = Capital employed×Normal rate of return/100 =41,00,000×10/100 = 41,00,000

Profit of the firm =  ` 5,00,000

 Super Profit = Actual Profit – Normal Profit = 5,00,000 – 4,10,000 =90,000 Goodwill =90,000×100/10 = ` 9,00,000

(ii) Calculation of Goodwill by Capitalisation of Average Profit Method

 goodwill = Capitaled Value of Profit – Actual capital employed Capitalised value of profit = actual profit×100/normal rate of return = 5,00,000×100/10 = 50,00,000 Capital employed = Assets- external liabilities = 55,00,000-14,00,000 = 41,00,000 Goodwill = 50,00,000-41,00,000 = 9,00,000

#### Question 42:

On 1st April, 2018, a firm had assets of  ` 1,00,000 excluding stock of  ` 20,000. The current liabilities were  ` 10,000 and the balance constituted Partners' Capital Accounts. If the normal rate of return is 8%, the Goodwill of the firm is valued of  ` 60,000 at four years' purchase of super profit, find the actual profits of the firm.

Total Assets of the firm=(Sundry Assets + Stock)= `(1,00,000+20,000)= `1,20,000

Current Liabilities of the firm= `10,000

Capital Employed=(Total Assets - Current Liabilities)= `(1,20,000 - 10,000)= `1,10,000

Normal Profits=Capital Employed × Normal Rate of Return/100= `1,10,000×8/100= `8,800

Goodwill = Super Profits × No. of years of purchase

60,000= Super Profits × 4

Super Profits= `60,000/4= `15,000

Super Profits= Average Actual Profits - Normal Profits

15,000=Average Actual Profits - 8,800

Average Actual Profits= `(15,000+8,800)= `23,800

#### Question 43:

Average profit of the firm is  ` 2,00,000. Total assets of the firm are  ` 15,00,000 whereas Partners' Capital is  ` 12,00,000. If normal rate of return in a similar business is 10% of the capital employed, what is the value of goodwill by Capitalisation of Super Profit?

 Goodwill =Super Profit × 100Normal Rate of Return =80,000×100/10 = ` 8,00,000

Working Notes:

WN1: Calculation of Super Profit

Average Profit=Total Profit for past given years/Number of Years

= ` 2,00,000

Normal Profit = Capital Employed × Normal Rate of Return/100

=12,00,000×10/100= ` 1,20,000

Super Profit=Average Profit-Normal Profit

=2,00,000-1,20,000= ` 80,000

WN2: Calculation of Capital Employed

Capital Employed=Total Assets-Outside Liabilities

=15,00,000-3,00,000= ` 12,00,000

#### Question 44:

Rajan and Rajani are partners in a firm. Their capitals were Rajan  ` 3,00,000; Rajani  ` 2,00,000. During the year 2018−19, the firm earned a profit of  ` 1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20%.

Goodwill=Super Profits×100Nominal Rate of ReturnSuper Profits=Average Profit-Normal ProfitAverage Profit= `1,50,000 (Given)Normal Profit=Capital Employed×Normal Rate of ReturnNormal Profit=(3,00,000+2,00,000)×20%= `1,00,000Super Profit=1,50,000-1,00,000= `50,000Goodwill=50,000×10020= ` 2,50,000

#### Question 45:

Average profit of GS & Co. is  ` 50,000 per year. Average capital employed in the business is  ` 3,00,000. If the normal rate of return on capital employed is 10%, calculate goodwill of the firm by:
(i) Super Profit Method at three years' purchase; and
(ii) Capitalisation of Super Profit Method.

(i)        Goodwill

#### =20,000×3= ` 60,000

(ii)        Goodwill

#### = ` 2,00,000

Working Notes:

WN1: Calculation of Super Profits

Average Profit=Total Profits for past given years/No. of Years

= ` 50,000

Normal Profit=Capital Employed×Normal Rate of Return/100

=3,00,000×10/100= ` 30,000

Super Profit=Average Profit-Normal Profit

=50,000-30,000= ` 20,000