Question 15 Chapter 3 of +2-A
15. Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four years they have been getting annual salaries of 50,000 and 40,000 respectively. The annual accounts have shown the following net profit before charging partners’ salaries: Year ended 31st March, 2017 − 1,40,000; 2018 − 1,01,000 and 2019 − 1,30,000. On 1st April, 2019, Zeenu is admitted to the partnership for 1/4th share in profit without any salary. Goodwill is to be valued at four years’ purchase of weighted average profit of last three years after partners′ salaries; Profits to be weighted as 1 : 2 : 3, the greatest weight being given to the last year. Calculate the value of Goodwill.
The solution of Question 15 Chapter 3 of +2-A:
| Year |
Profit A |
Partners’ |
Profit after |
Weight D |
Product (E = C * D) |
| 31st March, 2017 | 1,40,000 | 90,000 | 50,000 | 1 | 50,000 |
| 31st March, 2018 | 1,01,000 | 90,000 | 11,000 | 2 | 22,000 |
| 31st March, 2019 | 1,30,000 | 90,000 | 40,000 | 3 | 1,20,000 |
| Total | 6 | 1,92,000 | |||
|
Average Profit |
= | Total Profit for past given years |
| Number of years |
| = | 1,92,000 | |
| 6 | ||
| = | 32,000 |
Number of years’ purchase = 4
| Goodwill | = | Weighted Average Profit X Number of years’ purchase |
| Goodwill | = | 32,000 X 3 |
| Goodwill | = | 1,28,000 |
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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
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