Question
21:
A business has earned average profit of 1,20,000
during the last four years and the normal rate of turn in similar business is
15%. If goodwill of the firm is valued at 1,35,000 at 3 years' purchase of
average super profit, find the capital employed of the firm.
Answer:
Super profit= 1,35,000 /3=45,000
Normal Profit = average profit- super profit
Normal Profit = 1,20,000- 45,000 =75,000
Capital Employed = Normal Profit×100/ Normal Rate of
Return
Capital Employed = 75,000×100/15
Capital Employed=5,00,000
Question 22:
Average profit earned by a firm is ₹ 1,00,000 which includes undervaluation of stock of ₹ 40,000 on an average basis. The capital invested in the business is ₹ 6,30,000 and the normal rate of return is 5%. Calculate goodwill of the firm on the basis of 5 times the super profit.
Answer:
Average normal profit= (Average Profit + Undervaluation of stock on average basis*)
Average normal profit =₹(1,00,000+40,000)=₹1,40,000
Capital Employed in the business=₹6,30,000
Normal Profits=Capital Employed×Normal Rate of Return/100=₹6,30,000×5/100=₹31,500
Super Profits=Average Normal Profits - Normal Profits=₹(1,40,000-31,500)=₹1,08,500
Goodwill=Super Profits × No. of years of purchase=₹(1,08,500×5)=₹5,42,500
*Stock has been taken to be closing stock if nothing is specified in the question
Question 23:
Average profit earned by a firm is ₹ 7,50,000 which includes overvaluation of stock of ₹ 30,000 on an average basis. The capital invested in the business is ₹ 42,00,000 and the normal rate of return is 15%. Calculate goodwill of the firm on the basis of 3 time the super profit.
Answer:
Average
Profit earned by a firm = ₹ 7,50,000
Overvaluation of Stock = ₹ 30,000
Average Actual Profit = Average Profit earned by a firm –
Overvaluation of Stock
or, Average Actual Profit = 7,50,000 – 30,000 = ₹
7,20,000
Normal
profit = Capital employed×Rate of return/100
Normal
profit = 42,00,000×15/6,30,000
Super Profit = Actual Average Profit – Normal Profit
or, Super Profit = 7,20,000 – 6,30,000 = ₹ 90,000
Goodwill = Super Profit × Number of Times
Goodwill = 90,000 × 3 = ₹ 2,70,000
Question 24:
Akshay and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April, 2025. They agreed to value goodwill at 3 years' purchase of Super Profit Method for which they decided to average profit of last 5 years. The profits for the last 5 years were:
|
Year Ended |
Net
Profit (₹) |
|
|
31st March, 2021 |
1,50,000 |
|
|
31st March, 2022 |
1,80,000 |
|
|
31st March, 2023 |
1,00,000 |
(Including abnormal loss of ₹
1,00,000) |
|
31st March, 2024 |
2,60,000 |
(Including abnormal gain (profit)
of ₹ 40,000) |
|
31st March, 2025 |
2,40,000 |
|
The firm
has total assets of ₹ 20,00,000 and Outside Liabilities of ₹
5,00,000 as on that date. Normal Rate of Return in similar business is 10%.
Calculate value of goodwill.
Answer:
|
Goodwill
|
=Super Profit×No. of Years' Purchase =48,000×3=₹ 1,44,000 |
Working Notes:
WN: 1 Calculation of Normal Profits:
|
Year |
Profit/(Loss) (₹) |
Adjustment |
Normal Profit (₹) |
|
31 March, 2021 |
1,50,000 |
- |
1,50,000 |
|
31 March, 2022 |
1,80,000 |
- |
1,80,000 |
|
31 March, 2023 |
1,00,000 |
1,00,000 |
2,00,000 |
|
31 March, 2024 |
2,60,000 |
(40.000) |
2,20,000 |
|
31 March, 2025 |
2,40,000 |
- |
2,40,000 |
|
|
Total Profit |
9,90,000 |
WN2: Calculation of Super Profits
Average profit = total profit of past given
years / number of years
Average profit =9,90,000/5=1,98,000
Normal
profit = Capital employed×Rate of return/100
=
15,00,000×10/100=1,50,000
Super profit = Actual profit - Normal profit
= 1,98,000 – 1,50,000=48,000
WN3: Calculation of Capital Employed
|
Capital Employed |
=Total Assets-Outside Liabilities =20,00,000-5,00,000=₹15,00,000 |
Question 25:
From the following information, calculate value of goodwill of the firm by applying Capitalisation Method:
Total Capital of the firm ₹16,00,000.
Normal rate of return 10%.
Profit for the year ₹2,00,000.
Answer:
Goodwill=
Capitalised value – Actual capital
Capitalised
value of goodwill= profit ×100/ Normal rate of return
Capitalised
value of goodwill= 2,00,000×100/ 10=20,00,000
Total Capital = ₹ 16,00,000
Goodwill = 20,00,000-16,00,000 =4,00,000
Ts Grewal Solution 2025-2026
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Class 12 / Volume – I