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Question 19 Chapter 3 of +2-Part-1
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18. (Avg Profit/ Super Profit/Capitalisation method) The following information relates to a partnership firm:
a. 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
b. Average capital employed Rs.3,00,000
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c. Normal rate of profit is 10%
Find the value of goodwill on the following basis:
a. Four years purchase of average profit
b. Four years purchase of super profit
c. 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 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 | = | Super Profit X Number of years’ purchase |
| = | 12,000 X 4 | |
| Goodwill | = | 48,000 |
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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 |
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 |
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| 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
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- 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
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
