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

Question 21 Chapter 3 of +2-A

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)

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

2 Book 1 min - Question 21 Chapter 3 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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