# Question 21 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 21 Chapter 3 of +2-A

Super Profit Method

21. Average profit earned by a firm is 80,000 which includes undervaluation of stock of 8,000 on an average basis. The capital invested in the business is 8,00,000 and the normal rate of return is 8%. Calculate goodwill of the firm on the basis of 7 times the super profit.

The solution of Question 21 Chapter 3 of +2-A

:

 Super Profit = Actual average Profit- Normal Profit Actual average Profit = Average Profit + Adjustments (if any) = 80,000 + 8,000 (Undervaluation of Stock) = 88,000

 Normal Profit = Capital Employed X Normal Rate of Return 100
 = 8,00,000 X 8 100 = 64,000

 Super Profit = 88,000 – 64,000 = 24,000

Number of years’ purchase = 7

 Goodwill = Super ProfitX number of years’ purchase Goodwill = 24,000 X 3 Goodwill = 1,68,000

### 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. 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