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12th | Nature And Valuation of Goodwill | Question No.  16 To 20 |  Ts Grewal Solution 2022-2023

Question 16:


Atul and Bipul had a firm in which they had invested  ` 50,000. On an average, the profits were ` 16,000. The normal rate of return in the industry is 15%. Goodwill is to be valued at four years' purchase of profits in excess of profits @ 15% on the money invested. Calculate the value goodwill.

Answer:


Goodwill= Super profit × no. of purchases years’

Normal profit = Capital employed×Rate of return/100

Normal profit = 50,000×15/100=7,500

Actual profit =16,000

Super profit = Actual profit - Normal profit

Super profit = 16,000 – 7,500=8,500

Number of years’ purchase = 4

Goodwill =8,500×4=34,000

 

Question 17:


The total capital of the firm of Sakshi, Mehak and Megha is  ` 1,00,000 and the market rate of interest is 15%. The net profits for the last 3 years were  ` 30,000;  ` 36,000 and  ` 42,000. Goodwill is to be valued at 2 years' purchase of the last 3 years' super profits. Calculate the goodwill of the firm.

Answer:


Goodwill=Super Profit×Number of Years' Purchase

Super Profits = Average Profit - Normal Profit Average Profits = Total ProfitsNumber of Years=30,000+36,000+42,000÷3= ` 36,000

Normal Profits = Capital Employed × Normal Rate of Return=1,00,000×15÷100=15,000

Super Profits=36,000-15,000=21,000

Goodwill=21,000×2= ` 42,000

 

Question 18:


A business earned an average profit of  ` 8,00,000 during the last few years. The normal rate of profit in the similar type of business is 10%. The total value of assets and liabilities of the business were  ` 22,00,000 and  ` 5,60,000 respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at 2½   years' purchase of super profits.

Answer:


Average profit =80,000

Normal profit = Capital employed×Rate of return/100

Normal profit = 16,40,000×10/100=1,64,000

Capital employed = total assests- Outside liabilities

Capital employed = 22,00,000- 5,60,000=16,40,000

Super profit = Actual profit - Normal profit

Super profit =8,00,000-1,64,000=6,36,000

Goodwill= Super profit × no. of purchases years’

Number of years’ purchase = 2.5

Goodwill=  6,36,000×2.5 =15,90,000

Question 19:


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 20:


A partnership firm earned net profits during the last three years ended 31st March, as follows: 2020 −  ` 17,000; 2021 −  ` 20,000; 2022 −  ` 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

Ts Grewal Solution 2022-2023

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Class 12 / Volume – I

Chapter 3 – Nature And Valuation fo Goodwill

 

Question No. 1 To 5
Question No. 5 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 To 39

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