Question 26 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 26 Chapter 3 of +2-A

Question 26 Chapter 3 of +2-A

26. A partnership firm earned net profits during the last three years ended 31st March, as follows:
2017 − 17,000; 2018 − 20,000; 2019 − 23,000.
The capital investment in the firm throughout the above-mentioned period has been 80,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital. Calculate value of goodwill on the basis of two years’ purchase of average super profit earned during the above-mentioned three years.

 

The solution of Question 26 Chapter 3 of +2-A

:

Super Profit Actual average Profit- Normal Profit
Actual average Profit = Total Profit for past given years
  = Number of years
  = 17,000+20,000+23,000
3
  = 60,000
3
  = 20,000

 

Normal Profit = Capital Employed X Normal Rate of Return
100
  = 80,000 X 15
100
  = 12,000    

 

Super Profit 20,000- 12,000
  = 8,000



Number of years’ purchase = 2

Goodwill = Super ProfitX number of years’ purchase
Goodwill = 8,000X 2
Goodwill  = 16,000

 

 



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 26 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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