Question 05 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 05 Chapter 3 of +2- Part-

Question 05 Chapter 3 of +2-Part-1

5. (Average Profit Method) Goodwill is to be valued at two years purchase of 3 years normal average profit of the firm. The profit for 2014-15, Rs.20,000 (including insurance claim received of Rs.40,000). The loss for 2015-16 Rs.8,000(including voluntary retirement compensation paid Rs.1,10,000). The profit for 2016-17 Rs.1,05,000 (including a profit of Rs.25,000 on the sale of a fixed asset. Calculate the value of goodwill.

 

The solution of Question 05 Chapter 3 of +2 Part-1: – 

 

Average Profit = Total Profit for past given years
    Number of years
     
  = (-20,000) + 1,02,000 + 80,000
  3
     
  = 1,62,000
  3
     
  = 54,000

 

Number of years’ purchase = 2
Goodwill = Average Profit X Number of years’ purchase
Goodwill = 54,000 X 2
Goodwill = 1,08,000

 

 

Working Note : –

*1 Calculation of Profits of last three years

Adjusted Profit for the year 2013 = Total Profit −Abnormal Gain
  = 20,000 -40,000
 
  = -20,000

 

Adjusted Profit for the year 2014 = Total Profit +Abnormal Loss
  = (-8,000) +1,10,000
 
  = 1,02,000

 

Adjusted Profit for the year 2015 = Total Profit −Indirect Expenses
  = 1,05,000 -25,000
 
  = 80,000



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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
  • Chapter No. 3 – Partnership Accounts – II (Introduction)
  • Chapter No. 4 – Partnership Accounts – III (Goodwill: Nature and Valuation)
  • Chapter No. 5 – Partnership Accounts – IV (Reconstitution of Partnership)
  • Chapter No. 6 – Partnership Accounts – V (Admission of A Partner)
  • Chapter No. 7 – Partnership Accounts – VI (Retirement and Death of A Partner)
  • 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 (Balance Sheet Only)
  • Chapter No. 2 – Techniques of Financial Statement Analysis
  • Chapter No. 3 – Ratio Analysis 
  • Chapter No. 4 – Cash Flow Statement

 

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

2 Book 1 min - Question 05 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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