Question
36:
Rajan and Rajani are partners in a firm. Their capitals were Rajan ` 3,00,000; Rajani ` 2,00,000. During the year 31st March, 2022, 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
37:
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
Question
38:
A business has earned average profit of ` 8,00,000 during the last
few years and the normal rate of return in similar business is 10%. Find value
of goodwill by:
(i) Capitalisation of Super
Profit Method; and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of
super profit.
Assets of the business
were ` 80,00,000 and its external
liabilities ` 14,40,000.
Answer:
Capital Employed=Total Assets - External Liabilities
=
`(80,00,000-14,40,000)=
`65,60,000
Normal Profits=Capital Employed
× Normal Rate of Return/100
=
`65,60,000×10/100= `6,56,000
Average Profits=
`8,00,000
Super Profits=Average Profits - Normal Profits
= `(8,00,000 - 6,56,000)=
`1,44,000
(i)As per Capitalisation of Super Profit method,Goodwill=Super Profit×100Normal Rate of Return
= `1,44,000×100/10=
`14,40,000
(ii)As per Super Profit method,Goodwill=Super Profit × No. of years of purchase
= `(1,44,000×3)=
`4,32,000
Question
39:
From the following information, calculate value of goodwill
of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation
of Average profit.
Information:
(a) Average Capital Employed is ` 6,00,000.
(b) Net Profit/(Loss) of the firm for the last three years ended are:
31st March, 2022 − ` 2,00,000, 31st
March, 2021 − ` 1,80,000, and 31st
March, 2020 − ` 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of ` 1,00,000 to partners is to be
taken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade
investments) is ` 7,00,000 whereas
Partners' Capital is ` 6,00,000 and Outside
Liabilities ` 1,00,000.
Answer:
(i) Goodwill
|
=Average Profit×No. of years' purchase
=80,000×3= ` 2,40,000
|
(ii) Goodwill
|
=Super Profit×No. of years' purchase
=20,000×3= ` 60,000
|
(iii) Goodwill
|
=Super Profit×100÷Normal Rate of Return
=20,000×100/10= ` 2,00,000
|
(iv) Goodwill
|
=Capitalised Value-Net Assets
=8,00,000-6,00,000= ` 2,00,000
|
Working
Notes:
WN1: Calculation of Average and Super Profits
Average Profit=Total Profits of past years given/No. of Years
=2,00,000+1,80,000+1,60,000/3
= ` 1,80,000,
Average Profit (Adjusted) = ` 1,80,000 -
1,00,000 (Remuneration to partners)
= ` 80,000
Normal Profit=Capital Employed×Normal Rate of Return/100
=6,00,000×10/100= ` 60,000
Super Profit=Average Profit (Adjusted)-Normal Profit
=80,000-60,000= ` 20,000
WN2: Calculation of Capital Employed
Capital Employed=Total Assets-Outside Liabilities
=7,00,000-1,00,000
= ` 6,00,000
Ts Grewal Solution 2022-2023
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Class 12 / Volume – I
Chapter 3 – Nature And Valuation fo Goodwill
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