Question 04 Chapter 3 of +2-A - T.S. Grewal 12 Class Part

Question 04 Chapter 3 of +2-A

Table of Contents

The solution of Question 04 Chapter 3 of +2-A:

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

4. Calculate the value of a firm’s goodwill on the basis of one and a half years’
purchase of the average profit of the last three years. The profit for the first year was 1,00,000, profit for the second
year was twice the profit of the first year and for the third year, profit was one and half times of the profit of the second year.

The solution of Question 04 Chapter 3 of +2-A:

Average Profit	=	Total Profit for past given years*¹
		Number of years

Average Profit	=	1,00,000+2,00,000+3,00,000
		3

	=	6,00,000
	=	3
	=	2,00,000

Number of years’ purchase = 1.5

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Goodwill	=	Average Profit X Number of years’ purchase
Goodwill	=	2,00,000 X 1.5
Goodwill	=	3,00,000

Working Note: –

*1 Calculation of Profits of last three years

1st year’s Profit	=	1,00,000 (Given)
2nd year’s Profit	=	Twice the profit of the first year
	=	1,00,000 X 2
	=	2,00,000
2nd year’s Profit	=	one and half times the profit of the second year
	=	2,00,000 X 1.5
	=	3,00,000

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

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
Chapter No. 3 – Goodwill: Nature and Valuation
Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
Chapter No. 5 – Admission of a Partner
Chapter No. 6 – Retirement/Death of a Partner
Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

Chapter No. 8 – Company Accounts – Accounting for Share Capital
Chapter No. 9 – Company Accounts – Issue of Debentures
Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

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

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