Question 26:
A firm earns average profit of ` 3,00,000 during the last few years. The Normal Rate of Return of the industry is 15%. The assets of the business were ` 17,00,000 and its liabilities were ` 2,00,000.
Calculate the goodwill of the firm by Capitalisation of Average Profit Method.
Answer:
Calculation of Goodwill by Capitalisation of
Average Profit Method
|
Goodwill |
= Capitalised Value of Profit
– Actual capital employed |
|
Capitalised value of profit |
= Actual profit×100/normal rate
of return = 3,00,000×100/15 = 20,00,000 |
|
Capital employed |
= Assets- external liabilities = 30,00,000-15,00,000 = 15,00,000 |
|
Goodwill |
= 20,00,000-15,00,000 = 5,00,000 |
Question 27: A and B were partners in a firm with capitals of `3,00,000 and `2,00,000 respectively. The normal rate of return was 20% and the capitalised value of average profits was `7,50,000. Calculate goodwill of the firm by capitalisation of average profits method. (CBSE 2020 C)
Answer:
Total Actual Capital Employed by A and B is `3,00,000 + `2,00,000= `5,00,000
capitalised value of average profits = `7,50,000
|
Goodwill |
= |
Capitalised
Value – Capital Employed |
|
|
= |
7,50,000 - 5,00,000 |
|
Goodwill |
= |
2,50,000 |
Question
28: Puneet and Tarun are in restaurant business having
credit balances in their fixed Capital Accounts as `2,50,000 each. They have credit balances in their Current
Accounts of `30,000 and `20,000 respectively. The
firm does not have any liability. They are regularly earning profits and their
average profit of last 5 years is `1,00,000. if the normal rate of return is 10%, find the value of
goodwill by Capitalisation of Average Profit Method.
Answer:
Total Actual Capital Employed = 2,50,000+2,50,000+30,000+20,000
=5,50,000
Capitalised Value of Average profit= Average Profit×100/Rate of Return
= 1,00,000×100/10
=10,00,000
|
Goodwill |
= |
Capitalised
Value – Capital Employed |
|
|
= |
10,00,000 - 5,50,000 |
|
Goodwill |
= |
4,50,000 |
Question 29:
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: 2024 − `54,000;
2023 − `42,000;
2022 − `39,000;
2021 − `67,000
and 2018 − `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 |
Question 30:
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. (Delhi, 2013 C)
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