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

Page No 3.35:

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.

Answer:

(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

Page No 3.35:

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.

Answer:

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

Page No 3.35:

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?

Answer:

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
 

Page No 3.35:

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%.

Answer:

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

Page No 3.35:

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.

Answer:

(i)        Goodwill

=Super Profit×No. of Years' Purchase             

=20,000×3= ` 60,000

(ii)        Goodwill

=Super Profit×100/Normal Rate of Return              

=20,000×100/10

= ` 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