Question 25 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 25 Chapter 3 of +2-A

25. Average net profit expected in future by XYZ firm is 36,000 per year. Average capital employed in the business by the firm is 2,00,000. The normal rate of return from capital invested in this class of business is 10%. Remuneration of the partners is estimated to be 6,000 p.a. Calculate the value of goodwill on the basis of two years’ purchase of super profit.

The solution of Question 25 Chapter 3 of +2-A

:

 Super Profit = Actual average Profit- Normal Profit Actual average Profit = Average Profit + Adjustments (if any) = 36,000+ 6,000 (Partners Remuneration) = 30,000

 Normal Profit = Capital Employed X Normal Rate of Return 100
 = 2,00,000 X 10 100 = 3,750

 Super Profit = 30,000 – 20,000 = 10,000

Number of years’ purchase = 2

 Goodwill = Super ProfitX number of years’ purchase Goodwill = 10,000X 2 Goodwill = 20,000

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