Question 16:
Average net profit expected in future by XYZ firm is ` 36,000 per year. Average capital employed in the business by the firm is ` 2,00,000. The normal rate of return from capital invested in this class of business is 10%. Remuneration of the partners is estimated to be ` 6,000 p.a. Calculate the value of goodwill on the basis of two years' purchase of super profit.
Answer:
Goodwill= Super profit × no. of purchases
years’
Normal profit = Capital employed×Rate of
return/100
Normal profit = 2,00,000×10/100=20,000
Actual exceeded profit =30,000-6000=30,000
Super profit = Actual profit - Normal profit
Super profit = 30,000 – 20,000=10,000
Number of years’ purchase = 2
Goodwill =10,000×2=20,000
Question 17:
A partnership firm earned net profits during the last three years ended 31st
March, as follows: 2022 − `
17,000; 2023 − `
20,000; 2024 − `
23,000.
The capital investment in the firm throughout the above-mentioned period has
been ` 80,000. Having regard to the risk
involved, 15% is considered to be a fair return on the capital. Calculate value
of goodwill on the basis of two years' purchase of average super profit earned
during the above-mentioned three years.
Answer:
Goodwill=
Super profit × no. of purchases years’
Average profit = total profit of past given
years/number of years
Average Actual profit
=17,000+20,000+20,000/3=20000
Normal
profit = Capital employed×Rate of return/100
Normal
profit = 20,000×15/100=12,000
Super profit = Actual profit - Normal profit
Super profit = 20,000 – 12,000=8,000
Number of years’ purchase = 2
Goodwill=
8,000 × 2=16,000
Question 18:
On 1st April, 2024,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.
Answer:
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 19:
Average profit
of a firm during the last few years is `2,00,000 and the
normal rate of return in a similar business is 10%. If the goodwill of the firm
is `2,50,000 at 4 years'
purchase of super profit, find the capital employed by the firm.
Answer:
Goodwill= Super profit × no. of
purchases years’
2,50,000=(Average profit –
Normal profit ) × 4 purchases years’
Or 250,000/4-2,00,000=- Normal profit
Or Normal
profit =1,37,500
Normal rate
of return=10%
Capital
employed = Normal profit ×100/ normal rate of return
Capital
employed =1,37,500×100/10=13,75,000
Question 20: A
business earned an average profit of Rs. 1,80,000 during the last few years. Average capital employed
by the firm is Rs. 12,50,000.
If goodwill of the firm is valued at Rs. 1,60,000 at 2 years' purchase of super profit, find normal
rate of return.
Answer:
Super profit= 1,60,000/2=80,000
Normal Profit = average
profit- super profit
Normal Profit = 1,80,000- 80,000 =1,00,000
Normal Rate of Return=1,00,000×100/12,50,000=8%
Ts Grewal Solution 2024-2025
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Class 12 / Volume – I