Question 21 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 21 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

The average net profit expected in future by Ram Lal & Co. are ₹ 60,000 per year. The average capital employed in the business by firm 5,00,000. The normal rate of return on the capital employed in similar business is 10%. Calculate goodwill of the firm by
(a) Super profit method on the basis of two years purchase, and
(b) Capitalisation method (Super Profit & Average Profit both)

The solution of Question 21 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1: - 

Actual Profits p.a	=	Rs.60,000
Capital Employed	=	Rs. 50,000
Rate of return	=	10%

 

Normal Profit	=	Capital Employed	X	Normal Rate of Return
				100
	=	5,00,000	X	10
				100
	=	50,000

i) Super Normal Profit Method

Super Profit	=	Actual Profit - Normal Profit
	=	60,000 - 50,000
	=	10,000

 

Number of years’ purchase	=	2
Goodwill	=	Super Profit X Number of years’ purchase
	=	10,000 X 2
	=	20,000

 

ii) Capitalisation Method:

a) Capitalisation of Super Profits Method:

Goodwill	=	Average Profit	X	100
				Normal Rate of Return
	=	60,000	X	100
				10
	=	6,00,000

 

Goodwill	=	Capitalised value of the business - Average Capital Employed
	=	6,00,000 - 5,00,000
	=	1,00,000

 

Thanks, Please Like and share with your friends  

Comment if you have any questions.

Also, Check out the solved question of previous Chapters: -

Usha Publication - Accountancy PSEB (Class 12) - Volume I - Solution

• Chapter No. 1 - Accounting Not for Profit Organisations
• Chapter No. 2 - Partnership Accounts - I (Introduction)
• Chapter No. 3 - Partnership Accounts - II (Goodwill: Nature and Valuation)
• Chapter No. 4 - Partnership Accounts - III (Reconstitution of Partnership)
• Chapter No. 5 - Partnership Accounts - IV (Admission of A Partner)
• Chapter No. 6 - Partnership Accounts - V (Retirement and Death of A Partner)
• Chapter No. 7 - Partnership Accounts - VI (Dissolution of Partnership Firm)
• Chapter No. 8 - Company Accounts (Share Capital)
• Chapter No. 9 - Company Accounts (Issue of Debentures)
• Chapter No. 10 - Company Accounts (Redemption of Debentures)

Usha Publication - Accountancy PSEB (Class 12) - Volume II - Solution

• Chapter No. 1 - Financial Statements of a Company
• Chapter No. 2 - Financial Statement Analysis
• Chapter No. 3 –  Tools of Financial Statement Analysis- Comparative and Common Size
• Chapter No. 4 - Ratio Analysis
• Chapter No. 5 - Cash Flow Statement

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication