Question 6:
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 |
2021 |
2022 |
2023 |
2024 |
2025 |
|
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, 2024 and 2025.
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
Question 7:
Sumit purchased Amit's business on 1st April, 2025. Goodwill was decided to be valued at two years' purchase of average normal profit of last four years. The profits for the past four years were:
|
Year
Ended |
31st
March, 2022 |
31st
March, 2023 |
31st
March, 2024 |
31st
March, 2025 |
|
Profits
(₹) |
80,000 |
1,45,000 |
1,60,000 |
2,00,000 |
Books of
Account revealed that:
(i) Abnormal loss of ₹ 20,000 was debited to Profit and Loss Account for
the year ended 31st March, 2022.
(ii) A fixed asset was sold in the year ended 31st March, 2023 and gain
(profit) of ₹ 25,000 was credited to Profit and Loss Account.
(iii) In the year ended 31st March, 2024 assets of the firm were not insured
due to oversight. Insurance premium not paid was ₹ 15,000.
Calculate the value of goodwill.
Answer:
Goodwill=Average Profit×No. of years' purchase
Goodwill
=1,41,250×2=₹ 2,82,500
Working Notes:
WN: 1 Calculation of Normal Profits
|
Year |
Profit/(Loss) (₹) |
Adjustment |
Normal Profit (₹) |
|
31 March, 2022 |
80,000 |
20,000 |
1,00,000 |
|
31 March, 2023 |
1,45,000 |
(25,000) |
1,20,000 |
|
31 March, 2024 |
1,60,000 |
(15,000) |
1,45,000 |
|
31 March, 2025 |
2,00,000 |
- |
2,00,000 |
|
|
5,65,000 |
||
WN: 2
Calculation of Average Profit
Average Profit=Total Profit for past given years Number of Years =5,65,000/4=
₹ 1,41,250
Question 8:
Profits of a firm for the year ended 31st March for the last five years were:
|
Year
Ended |
31st
March, 2021 |
31st
March, 2022 |
31st
March, 2023 |
31st
March, 2024 |
31st
March, 2025 |
|
Profits
(₹) |
20,000 |
24,000 |
30,000 |
25,000 |
18,000 |
Calculate
value of goodwill on the basis of three years' purchase of Weighted Average
Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for
years ended 31st March, 2021, 2022, 2023, 2024 and 2025.
Answer:
|
Year |
Profit |
× |
Weight |
= |
Product |
|
2021 |
20,000 |
× |
1 |
= |
20,000 |
|
2022 |
24,000 |
× |
2 |
= |
48,000 |
|
2023 |
30,000 |
× |
3 |
= |
90,000 |
|
2024 |
25,000 |
× |
4 |
= |
1,00,000 |
|
2025 |
18,000 |
× |
5 |
= |
90,000 |
|
Total |
|
|
15 |
|
3,48,000 |
|
|
|
|
|
|
|
Weighted Average profit = total profit of past given years/Total of Weighted
Weighed Average profit =3,48,000/15=23,200
Number of years’ purchase = 3
Goodwill= Weighted Average profit × no. of purchases years’
Goodwill=
23,200×3 =69,600
Question 9:
Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for
the last four years they have been getting annual salaries of ₹ 50,000
and ₹ 40,000 respectively. The annual accounts have shown the following
net profit before charging partners' salaries:
Year ended 31st March, 2023 − ₹ 1,40,000; 2024 − ₹
1,01,000 and 2025 − ₹ 1,30,000.
On 1st April, 2025, Zeenu is admitted to the partnership for 1/4th share in
profit (without any salary). Goodwill is to be valued at four years' purchase
of weighted average profit of last three years (after partners' salaries);
Profits to be weighted as 1 : 2 : 3, the greatest weight being given to the
last year. Calculate the value of Goodwill.
Answer:
|
Year |
Profits before charging Salary (₹) |
Profits after charging Salary (₹) |
Weights |
Weighted Profits (₹) |
|
31st March, 2023 |
1,40,000 |
1,40,000- 90,000= 50,000 |
1 |
50,000 |
|
31st March, 2024 |
1,01,000 |
1,01,000- 90,000= 11,000 |
2 |
22,000 |
|
31st March, 2025 |
1,30,000 |
1,30,000- 90,000= 40,000 |
3 |
1,20,000 |
|
Total |
6 |
1,92,000 |
||
Weighted Average Profits=Total of Weighted Profits/Total Weights=₹1,92,000/6=₹32,000
Goodwill=Weighted Average Profits × No. of years of Purchase =₹(32,000×4)= ₹1,28,000
Question 10:
The capital of the firm of Anuj and Benu is ₹10,00,000
and the market rate of interest is 15%. Annual salary to the partners is ₹60,000
each. The profit for the last three years were ₹3,00,000, ₹3,60,000
and ₹4,20,000. Goodwill of the firm is to be valued on the basis of two
years' purchase of last three years average super profit. Calculate the
goodwill of the firm. (CBSE 2019)
Answer:
Average profit
= Total profit / number of years
=3,00,000+360,000+4,20,000/3
=3,60,000
Goodwill=
Super profit × no. of purchases years’
Super profit =
average profit- partners salary- normal profit × no. of purchases years’
=360,000-(60,000×2)-(10,00,000×15/100)×2
purchase
=90,000×2
=1,80,000
Ts Grewal Solution 2025-2026
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Class 12 / Volume – I