Question 14 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Q-14 - CH-3 - Usha +2 Book 2018 - Solution

Question 14 Chapter 3 of +2-Part-1

14. (Super Profit Method) Calculate goodwill at two years purchase of super-profits.

1. Normal rate of return-10%.
2. Assets: Machinery Rs.2,00,000; Building Rs.3,00,000; Stock Rs.70,000;
3. Debtors Rs.25,000; Provision for doubtful debts Rs.5,000; Preliminary expenses Rs.10,000.
4. Liabilities : Creditors Rs.20,000; Bank Loan Rs.40,000.
5. Profits : 1st Year Rs.80,000; 2nd Year Rs.1,05,000; 3rd Year Rs.90,000
Charge depreciation at 10% p.a. building in 3rd year.

The solution of Question 14 Chapter 3 of +2 Part-1: –

 Capital Employed = Total Assets – Liabilities = (2,00,000+2,70,000+70,000+25,000)-(5,000+10,000+20,000+40,000) = 4,90,000

 Normal Profit = Capital Employed X Normal Rate of Return 100 = 4,90,000 X 10 100 = 49,000

 Average Profit = Total Profit for past given years Number of years = 80,000 1,05,000 +(90,000 – 30,000) 3 = 2,45,000 3 = 81,667

 Super Profit = 81,667 -49,000 = 32,667 Number of years’ purchase = 2 Goodwill = Super Profit X Number of years’ purchase = 32,667 X 2 = 65,334