Question 19 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 19 Chapter 3 of +2- Part-

Question 19 Chapter 3 of +2-Part-1

  1. 18. (Avg Profit/ Super Profit/Capitalisation method) The following information relates to a partnership firm:
  2. Profits for the last six years:- 2013: Rs.18,000(loss); 2014: Rs.30,000; 2015: Rs.25,000; 2016: Rs.55,000; 2017: Rs.65,000; 2018: Rs.95,000
  3. Average capital employed Rs.3,00,000
  4. Normal rate of profit is 10%
    Find the value of goodwill on the following basis:
  1. Four years purchase of average profit
  2. Four years purchase of super profit
  3. Capitalization of super profit.

 

The solution of Question 19 Chapter 3 of +2 Part-1: – 

i) Calculation of Goodwill with average Profit

Number of years’ purchase = 3
Goodwill = Average Profit*1  X Number of years’ purchase
  = 42,000 X 4
Goodwill = 1,68,000

ii) Four years purchase of super profit.

Number of years’ purchase = 4
Goodwill = Average Profit*2  X Number of years’ purchase
  = 12,000 X 4
Goodwill = 48,000

iii) On the basis of Capitalisation of Super Profit.

Goodwill = Super Profit X 100
Normal Rate of Return
         
  = 12,000 X 100
  10
         
  = 1,20,000    

 

Normal Profit = Capital Employed X Normal Rate of Return
100
         
  = 20,000 (i.e. 26,000-6,000) X 10
  100
         
  = 2,500    

Working Notes: –

*1 Calculation of Average Profit

Average Profit = Profit for past given years
    Number of years
     
  = (-18,000) + 30,000+ 25,000 + 55,000 + 65,000+ 95,000
  6
     
  = 2,52,000
  6
     
  = 42,000

 

*2 Calculation of Super Profit

Normal Profit = Capital Employed X Normal Rate of Return
  100
         
  = 3,00,000 X 10
  100
         
  = 30,000    

 

Super Profit = Actual Profit  – Normal Profit
  = 42,000 – 30,000
  = 12,000

 

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Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 1 min - Question 19 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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