Question 14 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 14 Chapter 3 of +2-A

Question 14 Chapter 3 of +2-A

14. A and B are partners sharing profits and losses in the ratio of 5 : 3. On 1st April 2019, C is admitted to the partnership for 1/4th share of profits. For this purpose, goodwill is to be valued at two years’ purchase of the last three years’ profits after allowing partners’ remuneration. Profits to be weighted 1: 2 : 3, the greatest weight being given to last year. Net profit before partners’ remuneration were: 2016-17 : 2,00,000; 2017-18 : 2,30,000; 2018-19 : 2,50,000. The remuneration of the partners is estimated to be 90,000 p.a. Calculate the amount of goodwill.

 

The solution of Question 14 Chapter 3 of +2-A

:

 

Year
Profit
A

Partners’
Remuneration
B

Profit after
Partners’
Remuneration
(C = A * B)

Weight

D

Product
(E = C * D)

2016-17 2,00,000 90,000 1,10,000 1 1,10,000
2017-18 2,30,000 90,000 1,40,000 2 2,80,000
2018-19 2,50,000 90,000 1,60,000 3 4,80,000
Total 6 8,70,000

 

 

Average Profit 

Total Profit for past given years
Number of years

 

  8,70,000
6
  = 1,45,000



Number of years’ purchase = 3

Goodwill = Average Profit X Number of years’ purchase
Goodwill = 1,45,000 X 3
Goodwill  = 2,90,000

 

 



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 14 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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