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12th | Goodwill: Nature and Valuation | Question No. 31 To 35 | Ts Grewal Solution 2023-2024

Question 31:


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. (CBSE Sample paper, 2018)

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

 

Question 32: Average profit of a firm during the last few years is `1,50,000. In similar business, the normal rate of return is 10% of the capital employed. Calculate the value of goodwill by capitalisation of super profit method if super profits of the firm are `50,000. (CBSE 2020)


Answer:


Super Profit = 50,000

Goodwill = Super Profit ×100/Rate of Return

Goodwill = 50,000 ×100/10

Goodwill = 5,00,000

Question 33: Raja Brothers earn an average profit of `30,000 with a capital of `2,00,000. The normal rate of return in the business is 10%. Using capitalisation of super profit method, workout the value of the goodwill of the firm. (NCERT)


Answer:


Calculation of goodwill under capitalization of super profit method

Capital value = super profit ×100/rate of return

Normal profit = capital employed × rate of return/100

Normal profit = 200,000×10/100=20,000

Super profit = 30,000-20,000

Super profit = 10,000

Goodwill= 10,000×100/10=1,00,000

Question 34:


Rajan and Rajani are partners in a firm. Their capitals were Rajan  ` 3,00,000; Rajani  ` 2,00,000. During the year 31st March, 2023, 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×100/Nominal Rate of Return

Super Profits=Average Profit-Normal Profit

Average Profit= `1,50,000 

(Given)Normal Profit=Capital Employed×Normal Rate of Return

Normal Profit=(3,00,000+2,00,000)×20%= `1,00,000

Super Profit=1,50,000-1,00,000= `50,000

Goodwill=50,000×100/20= ` 2,50,000

 

Question 35:


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

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