Question 09 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 09 Chapter 3 of +2- Part-

Question 09 Chapter 3 of +2-Part-1

9. (Weighted Average Profit Method) Calculate the value of goodwill of a firm on the basis of three years purchase of the weighted average profit of the last four years. The profits of last four years were:

Year  Profit/Loss
2014-15 5,000
2015-16 5,200
2016-17 9,300
2017-18 10,700

During 2014-15, there was abnormal loss of Rs.1,000 due to theft and in 2017-18 there was a profit from sale of land amounting to Rs.4,000. In 2015-16, closing stock was over valued by Rs.1,200. The weights are 1,2,3 and 4 for the year 2014-15,2015-16,2016-17 and 2017-18 respectively.

 

The solution of Question 09 Chapter 3 of +2 Part-1: – 

 

Calculation of Adjusted Profit
 
Particulars / Year Ended
2014-15 2015-16
2016-17
2017-18
Profit/(Loss) 5,000 5,200 9,300 10,700
Add: Abnormal Loss 1,000      
Less: Profit on sale of land       -4,000
Less: Overvaluation of Closing Stock   – 1,200    
Add: Overvaluation of Opening Stock     1,200  
         
Total 6,000 4,000 10,500 6,700

 

 

Calculation of Weighted Average Profit
Year
Adjusted Profit
(A)
Weight
(D)
Product
(E = C * D)

2014-15 6,000 1 6,000
2015-16 4,000 2 8,000
2016-17 10,500 3 31,500
2017-18 6,700 4 26,800
       
Total 10 72,300

 

Average Profit = Total Profit for past given years
    Number of years
     
  = 72,300
  10
     
  = 7,230

 

Number of years’ purchase = 2
Goodwill = Average Profit X Number of years’ purchase
Goodwill = 7,230 X 3
Goodwill = 21,690

 

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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 09 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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