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
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