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Question 17 Chapter 3 - Unimax Class 12 Part 1
17. Goodwill is to be valued at 3 years’ purchase of average profits of 3 years upto the date of valuation after deducting interest @ 6% on capital employed and a fair remuneration to each partner. The profits are assumed to be earned evenly throughout the year. Fair remuneration for the work done by each partner is Rs. 18000 per annum and total capital employed is Rs. 180000. The trading profits (before charging interest on Capital employed and remuneration of partners) were 2018 Rs. 65000 ; 2019 Rs. 75000 ; 2020 Rs. 80000 ; 2021 Rs. 62000. Calculate value of goodwill of a firm as on 30.6.2021. The firm is having three partners.
Capital employed = Rs. 180000
Number of partners = 3
Fair Remuneration of each partner = Rs. 18000 P.a.
Total Annual Remuneration of 3 partners
Rs. 18000 X 3 = Rs. 54000
| Year | Profit – (Remuneration + Interest on Capital) | Net Profits (Rs.) |
| 2003 | 65000-(54000+10800) | 200 |
| 2004 | 75000-(54000+10800) | 10200 |
| 2005 | 80000-(54000+10800) | 15200 |
| 2006 | 62000-(54000+10800) | (2800)(loss) |
| Total Profits of 3 years upto date of valuation i.e. 30-6-2021 | Rs. |
| Profit for 2018 for 6 months (200 X 6/12)=(1-7-2018 to 31-12-2018) | 100 |
| Profit for 2019 for full year | 10200 |
| Profit for 2020 for full year | 15200 |
| Loss for 2021 for 6 months upto 30-6-2021(Rs. 2800 X 6/12) | (1400) |
| Total profits for 3 years upto date of valuation i.e. 30-6-2021 | 24100 |
Average Profits = Total Profits/No. of years = Rs. 24100/3
= Rs. 8033.33
Goodwill = Average Profits X Number of years of purchase
= Rs. 8033.33 X 3
= Rs. 24100
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4 June 2022
4 June 2022