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.
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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.
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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 (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
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