# Volume-1 | Chapter- 3 | | Question: 46 to 48 | Ts grewal solution 2019-20 | Class-12th

#### Question 46:

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 profit.
Assets of the business were  ` 40,00,000 and its external liabilities  ` 7,20,000.

Capital Employed=Total Assets - External Liabilities

= `(40,00,000-7,20,000)= `32,80,000

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

= `32,80,000×10100= `3,28,000

Average Profits= `4,00,000

Super Profits=Average Profits - Normal Profits

= `(4,00,000 - 3,28,000)= `72,000

(i)As per Capitalisation of Super Profit method,Goodwill=Super Profit×100Normal Rate of Return

= `72,000×10010= `7,20,000

(ii)As per Super Profit method,Goodwill=Super Profit × No. of years of purchase

= `(72,000×3)= `2,16,000

#### Question 47:

Ajeet and Baljeet are partners in a firm. Their capitals are  ` 9,00,000 and  ` 6,00,000 respectively. During the year ended 31st March, 2019 the firm earned a profit of  ` 4,50,000. Assuming that the normal rate of return is 20%, calculate value of goodwill of the firm:
(i) By Capitalisation Method; and
(ii) By Super Profit Method if the goodwill is valued at 2 years' purchase of super profit.

 Capital Employed =(Total Liabilities - Current Liabilities) = `(9,00,000+6,00,000)= `15,00,000 Normal Profits =Capital Employed×Normal Rate of Return/100 = `15,00,000×20/100 = `3,00,000 Average Profits= `4,50,000 Super Profits =Average Profits - Normal Profits = `(4,50,000-3,00,000) = `1,50,000 (i)As per Capitalisation Method, Goodwill =Super Profits×100Normal Rate of Return          = `1,50,000×10020 = `7,50,000 (ii) As per Super Profit Method, Goodwill =Super Profit × No. of years of purchase = `(1,50,000×2)= `3,00,000

#### Question 48:

From the following information, calculate value of goodwill of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average profit.
Information:
(a) Average Capital Employed is
` 6,00,000.
(b) Net Profit/(Loss) of the firm for the last three years ended are:
31st March, 2018 −
` 2,00,000, 31st March, 2017 −  ` 1,80,000, and 31st March, 2016 −  ` 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of  ` 1,00,000 to partners is to be taken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is
` 7,00,000 whereas Partners' Capital is  ` 6,00,000 and Outside Liabilities  ` 1,00,000.

#### =8,00,000-6,00,000= ` 2,00,000

Working Notes:

WN1: Calculation of Average and Super Profits

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

=2,00,000+1,80,000+1,60,000/3

= ` 1,80,000

Average Profit (Adjusted) =  ` 1,80,000 - 1,00,000 (Remuneration to partners)

=  ` 80,000Normal Profit=Capital Employed×Normal Rate of Return/100

=6,00,000×10100= ` 60,000