Question 07 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 07 Chapter 3 of +2-A

Question 07 Chapter 3 of +2-A

Average Profit Method when Past Adjustments are Made: –

7. Divya purchased Jyoti’s business with effect from 1st April 2019. Profits shown by Jyoti’s
business for the last three financial years was:
2016-17 : 1,00,000 including an abnormal gain of 12, 500.
2017-18 : 1,25,000 after charging an abnormal loss of 25, 000.
2018-19: 1,12,500 excluding 12, 500 as insurance premium on firm′s property −now to be insured.
Calculate the value of a firm’s goodwill on the basis of two year’s purchase of the average profit of the last three years.

 

The solution of Question 07 Chapter 3 of +2-A

:

Average Profit  Total Profit for past given years
Number of years
Average Profit 87,500+1,50,000+1,00,000
3

 

  3,37,500
3
  = 1,12,500

Number of years’ purchase = 2

Goodwill = Average Profit X Number of years’ purchase
Goodwill = 1,12,500 X 2
Goodwill  = 2,25,000

 

Working Note: –

*1Calculation of Adjusted Profit

Adjusted profit for the year 2016-17 = Total Profit −Abnormal Gain
  = 1,00,000 -12,500
  = 87,500
Adjusted profit for the year 2017-18 = Total Profit +Abnormal Loss
  = 1,25,000 +25,000
  = 1,50,000
Adjusted profit for the year 2018-19 = Total Profit −Indirect Expenses
  = 1,12,500 -12,500
  = 1,00,000

 


T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

 

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

2 Book 1 min - Question 07 Chapter 3 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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