Double Entry Book Keeping Ts
Grewal Volume 1 2022-2023
Solutions for Class 12 Commerce Accountancy
Chapter 3 - Goodwill: Nature And
Valuation
Question 6:
Purav and Purvi are partners in a firm sharing profits and losses in
the ratio of 2 : 1. They decide to take Parv into partnership for 1/4th share on 1st April, 2022.
For this purpose, goodwill is to be valued at four times the average annual
profit of the previous four or five years, whichever is higher. The agreed
profits for goodwill purpose of the past five years are:
|
Year |
2018 |
2019 |
2022 |
2021 |
2022 |
|
Profits (
`) |
14,000 |
15,500 |
10,000 |
16,000 |
15,000 |
Calculate
the value of goodwill.
Answer:
Calculation of Average Profit for Five Years
|
Year |
Profit |
|
2014 – 15 |
14,000 |
|
2015 – 16 |
15,500 |
|
2019 – 17 |
10,000 |
|
2018 – 18 |
16,000 |
|
2019 – 19 |
15,000 |
|
Total Profit |
70,500 |
Average
Profit for Five Years=70,500/5=14,100
Calculation of Average Profit for Four Years
|
Year |
Profit |
|
2015 – 16 |
15,500 |
|
2019 – 17 |
10,000 |
|
2018 – 18 |
16,000 |
|
2019 – 19 |
15,000 |
|
Total Profit |
56,500 |
Average
Profit for Five Years=56,500/4=14,125
Average
Profit of four years is taken to compute the value of goodwill of the firm.
This is because Average Profit of four years is more than the Average
Profit of five years.
Goodwill= Average profit ×
no. of purchases years’
Goodwill= 14,125 ×4 =56,500
Question 7: Asin and Shreyas were partners sharing profits and losses in the ratio of 2:1. They admitted Shyam as a partner for 1/5th share in profits. For this purpose Goodwill of the firm was to be valued on the basis of three years' purchase of last five years' average profit. Profits for the last five years ended 31st March, were:
|
Year |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Profit (`) |
1,25,000 |
1,00,000 |
1,87,500 |
(62,500) |
1,25,000 |
Calculate Goodwill of the firm after adjusting the following:
Profit of 2018-19 was calculated after charging 25,000 for abnormal loss of goods by fire.
Answer;
Goodwill= Average profit × no. of purchases years’
=Sum of
normal profit × no. of
purchases years’/total no. of years
=1,25,000+1,00,000+25,000+1,87,500+(62,500)+1,25,000/5×3
(purchases years’)
=3,00,000
Question 8: Madhu and Vidhi are partners sharing profts in the ratio of 3:2. They decided to admit Manu as a partner from 1st April, 2022 on the following terms
(i) Manu will be given 2/5th share of the profit.
(ii) Goodwill of the firm will be valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were
2022-Profit `30,000 (after debiting loss of stock by fire `40,000).
2021-Loss `80,000 (includes voluntary retirement compensation paid `1,10,000).
2020-Profit `1,10,000 (including a gain (profit) of 30,000 on the sale of fixed assets).
Calculate the value of goodwill.
Answer;
Goodwill= Average
profit × no. of purchases years’
=Sum of
three years Profit × no. of
purchases years’/Total no. of years
=(first years profit+normal
loss)+(Second years loss+Retirement compensation)+(Third years’ profit – gain
on sale of fixed assets)×2year/3year
=(30,000+40,000)+(-80,000+1,10,000)+1,10,000-30,000)×2/3
=1,20,000
Question 9:
Tarang purchased Jyoti's business with effect from 1st April, 2022. Profits
shown by Jyoti's business for the last three financial years were:
|
2020 |
: |
` 1,00,000 (including an abnormal
gain of ` 12,500). |
|
2021 |
: |
` 1,25,000 (after charging an
abnormal loss of ` 25,000). |
|
2022 |
: |
` 1,12,500 (excluding
`
12,500 as insurance premium on firm's property- now to be insured). |
Calculate the value of firm's goodwill on the basis of two year's purchase of the average profit of the last three years.
Answer:
Normal Profit for the year 2020= (Total
Profit - Abnormal Gain)= `1,00,000-12,500= ` 87,500
Normal Profit for the year 2021= (Total Profit + Abnormal Loss)= ` 1,25,000+25,000= ` 1,50,000
Normal Profit for the year 2022= (Total Profit - Indirect Expenses)= ` 1,12,500-12,500= ` 1,00,000
Average Profits= (Normal Profits for 2020)+(Normal Profits for 2021)+(Normal Profits for 2022)÷3
Average Profits=87,500+1,50,000+1,00,000/3= ` 1,12,500
Goodwill=Average Profits of last three years × No. of years of PurchaseGoodwill=
` 1,12,500×2= ` 2,25,000
Question 10:
Abhay, Babu and Charu are partners
sharing profits and losses equally. They agree to admit Daman for equal share
of profit. For this purpose, the value of goodwill is to be calculated on the
basis of four years' purchase of average profit of last five years. These
profits for the year ended 31st March, were:
|
Year |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Profit/(Loss) (
`) |
1,50,000 |
3,50,000 |
5,00,000 |
7,10,000 |
(5,90,000) |
On
1st April, 2021, a car costing ` 1,00,000 was purchased and debited to
Travelling Expenses Account, on which depreciation is to be charged @ 25%.
Interest of `
10,000 on Non-trade Investments is credit to income for the year ended 31st
March, 2021 and 2022.
Calculate the value of goodwill after adjusting the above.
Answer:
Normal Profits for the year ended 31st
March, 2021:=Total Profits+Purchase of car wrongly debited - Depreciation on Car - Income from Non-trade Investments= `(7,10,000 + 1,00,000 - 25,000 - 10,000)=
` 7,75,000
Normal Profits for the year ended 31st March, 2022:=(Total Loss + Income from Non-Trade Investments)= `(5,90,000 + 10,000)= `6,00,000
Average Profits=Normal Profits from 31st March, 2018 to 31st March,2022/5
Average Profits= ` 1,50,000+3,50,000+5,00,000+7,75,000+(6,00,000)/5= `2,35,000
Goodwill=Average Profits for last 5 years×No. of years of purchase= `(2,35,000×4)= `9,40,000
Ts Grewal Solution 2022-2023
Click below for more Questions
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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