Question 11:

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 12:

Sakshi and Megha were partners sharing profits and losses in the ratio of 3 :1. Capital employed as on 31st March, 2026 was ₹ 14,00,000. Profit earned on an average is ₹1,80,000. Calculate goodwill of the firm on the basis of 5 years' purchase of Super Profits, if the normal rate of return is 10%.

Answer:

Normal Profit = Capital employed × Rate of Return/100

Normal Profit = 14,00,000× 10/100 = 1,40,000

Super Profit = Normal Profit – Average Profit

Super Profit = 1,80,000- 1,40,000 = 40,000

Goodwill = 40,000 × 5 = ₹ 2,00,000

 

Question13:

A and B were partners in a firm sharing profits equally. Their capitals were: A-1,20,000 and B- 80,000. The annual rate of interest is 20%. Profits of the firm for the last three years were 34,000; 38,000 and 30,000. They admitted C a new partner. On C's admission the goodwill of the firm was valued at 2 years' purchase of the super profits.

Calculate the value of goodwill of the firm on C's admission. (CBSE 2023)

Answer:

Since, Average Profit=  34,000 +38,000 + 30,000 =34,000

Normal Profit = 20% of Capital Employed = 20/100 x 2,00,000 = 40,000

Average Profit is lower than normal Profit. In other words, Super Profit is negative.

The firm does not have goodwill.

Question 14:

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 15:

A partnership firm earned net profits during the last three years ended 31st March, as follows:

2024 − ₹ 17,000; 2025 − ₹ 20,000; 2026 − ₹ 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