Question 06 Chapter 3 of +2-Part-1
6. (Calculate goodwill when partners capital are given) A firm of partner A, B and C has fixed capital of Rs.1,00,000, Rs.80,000 and Rs.1,20,000 respectively. Interest on capital is allowed @10% p.a. The profits of last four years before interest on capital were: I year: Rs.50,000; II Year: Rs.40,000; III year: Rs.70,000; IV year: Rs.60,000. Partners have been allowed salary of Rs.80,000 in total during the above four years.
As per agreement goodwill of the firm is to be valued at 2½ years of the average net profits of the last four years.
The solution of Question 06 Chapter 3 of +2 Part-1: –
| Average Profit | = | Total Profit for past given years |
| Number of years | ||
| = | 20,000 + 10,000 + 40,000 + 30,000 | |
| 4 | ||
| = | 1,00,000 | |
| 3 | ||
| = | 25,000 |
| Number of years’ purchase | = | 2 |
| Goodwill | = | Average Profit X Number of years’ purchase |
| Goodwill | = | 25,000 X 2.5 |
| Goodwill | = | 62,500 |
Working Note : –
*1 Calculation of Profits of last three years
| Adjusted Profit for 1st year | = | Total Profit −Interest on capital |
| = | 50,000 –(10,000+8,000+12,000) | |
| = | 20,000 |
| Adjusted Profit for 2nd year | = | Total Profit – Interest on capital |
| = | 40,000 –(10,000+8,000+12,000) | |
| = | 10,000 |
| Adjusted Profit for 3rd year | = | Total Profit − Interest on capital |
| = | 70,000 –(10,000+8,000+12,000) | |
| = | 40,000 |
| Adjusted Profit for 3rd year | = | Total Profit − Interest on capital |
| = | 60,000 –(10,000+8,000+12,000) | |
| = | 30,000 |
Every year, interest on capital will be deducted amounting to Rs.3,000 for four years.
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
