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12th | Goodwill: Nature and Valuation | Question No. 26 To 30 | Ts Grewal Solution 2023-2024

Question 26: 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 27: 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 28:


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: 2023 −  `54,000; 2022 −  `42,000; 2021 −  `39,000; 2020 −  `67,000 and 2019 −  `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 29:


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
=32,80,000

 

Normal profit

 

= Capital employed×Normal rate of return/100

=32,80,000×10/100

Super

 

Profit = Actual Profit – Normal Profit
= 4,00,000 – 3,28,000

=  ` 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

 

Question 30: 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;

Capitalised value of average profit =500,000×100/10=50,00,000

Actual capital employed= Assets – liabilities

=50,00,000-41,00,000

=9,00,000

Normal profit = 41,00,000×10/100

Super profit=5,00,000-4,10,000=90,000

Value of goodwill under super profit method

=90,000×100/10=9,00,000

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 2 – Nature And Valuation of Goodwill

 

Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30
Question No. 31 To 35
Question No. 36 and 37