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Question 21 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1
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The average net profit expected in future by Ram Lal & Co. are ₹ 60,000 per year. The average capital employed in the business by firm 5,00,000. The normal rate of return on the capital employed in similar business is 10%. Calculate goodwill of the firm by
(a) Super profit method on the basis of two years purchase, and
(b) Capitalisation method (Super Profit & Average Profit both)
The solution of Question 21 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1: –
| Actual Profits p.a | = | Rs.60,000 |
| Capital Employed | = | Rs. 50,000 |
| Rate of return | = | 10% |
| Normal Profit | = | Capital Employed | X | Normal Rate of Return |
| 100 | ||||
| = | 5,00,000 | X | 10 | |
| 100 | ||||
| = | 50,000 |
i) Super Normal Profit Method
| Super Profit | = | Actual Profit – Normal Profit |
| = | 60,000 – 50,000 | |
| = | 10,000 |
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| Number of years’ purchase | = | 2 |
| Goodwill | = | Super Profit X Number of years’ purchase |
| = | 10,000 X 2 | |
| = | 20,000 |
ii) Capitalisation Method:
a) Capitalisation of Super Profits Method:
| Goodwill | = | Average Profit | X | 100 |
| Normal Rate of Return | ||||
| = | 60,000 | X | 100 | |
| 10 | ||||
| = | 6,00,000 |
| Goodwill | = | Capitalised value of the business – Average Capital Employed |
| = | 6,00,000 – 5,00,000 | |
| = | 1,00,000 |
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Comment if you have any questions.
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
