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Question 04 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 04 Chapter 3 of +2- Part-
Q-4 - CH-3 - Usha +2 Book 2018 - Solution

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Question 04 Chapter 3 of +2-Part-1

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4. (Average Profit Method) Rani purchased Vani’s business on 31st March 2015. The profit disclosed by Vani business for the last three years were as follows:
Year
2013: Rs.40,000 (including an abnormal gain Rs.5,000)
2014: Rs.50,000(after charging an abnormal loss of Rs.10,000)
2015: Rs.45,000(excluding Rs.5,000 as insurance premium of firms property now to be insured)
Calculate the value of firm’s Goodwill on the basis of 2 years purchase of the average profit for the last three years.

The solution of Question 04 Chapter 3 of +2 Part-1: – 

Calculation of Adjusted Profit
Year
ProfitAdjustmentsAdjusted Profit
201340,000-5,00035,000
201450,000+ 10,00060,000
201545,000– 5,00040,000
Total 1,35,000
Average Adjusted Profit=Total Profit for past given years
Number of years
   
 =35,000 + 60,000 + 40,000
 3
   
 =1,35,000
 3
   
 =45,000

 

Number of years’ purchase=2
Goodwill=Average Profit X Number of years’ purchase
Goodwill=45,000 X 2
Goodwill=90,000

Working Note : –

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*1 Calculation of Profits of last three years

Adjusted Profit for the year 2013=Total Profit − Abnormal Gain
 =40,000 – 5,000
 
 =35,000

 

Adjusted Profit for the year 2014=Total Profit +Abnormal Loss
 =50,000 + 10,000
 
 =60,000

 

Adjusted Profit for the year 2015=Total Profit − Indirect Expenses
 =45,000 – 5,000
 
 =40,000

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

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