Question 06 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 06 Chapter 3 of +2- Part-

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.



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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 06 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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