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

Question 04 Chapter 3 of +2- Part-

Question 04 Chapter 3 of +2-Part-1

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: – 

 

Average 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 : –

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

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

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

 

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2 Book 1 min - Question 04 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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