Question 11 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 11 Chapter 3 of +2-Part-1

11. (Super Profit Method) A firm earned net profit during the last five years as follows:
(i) Rs.7,000; (ii) Rs.6,500; (iii) Rs.8,000; (iv) Rs.7,500; (v) Rs.6,000. The capital investment of the firm is Rs.40,000. A fair return on capital in the market is 12%. Find out the value of goodwill of the business if it is based on three years purchase of average super-profits of the past five years.

 

The solution of Question 11 Chapter 3 of +2 Part-1: – 

 

Super Profit	=	Actual average Profit – Normal Profit
Average Profit	=	Total Profit for past given years
		Number of years
	=	7,000 + 6,500 + 8,000 + 7,500 + 6,000
		5
	=	35,000
		5
	=	7,000

 

Average Profit	=	Capital Employed	X	Normal Rate of Return
				100
	=	40,000	X	12
				100
	=	4,800

 

Super Profit	=	7,000 – 4,800
	=	2,200
Number of years’ purchase	=	3
Goodwill	=	Super Profit X Number of years’ purchase
Goodwill	=	2,200 X 3
Goodwill	=	6,600

 

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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

 

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