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Question 28 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 28 Chapter 3 of +2-A
Question No.28- Chapter No.3 - T.S. Grewal +2 Book 2019-Solution

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Question 28 Chapter 3 of +2-A

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28. Ideal Marketing earned an average profit of 4,00,000 during the last five years. The normal rate of return on capital employed is 10%. Balance Sheet of the firm as at 31st March 2019 was as follows:

Liabilities AmountAssets Amount
Capital A/cs:  Land and Building 10,00,000 
Shyam5,00,000 Furniture 2,00,000
Sunder5,00,00010,00,000Investments 1,00,000
Current A/cs:  Sundry Debtors5,00,000
Shyam2,00,000 Bills Receivable50,000
Sunder2,00,0004,00,000Closing Stock 3,00,000
Reserves 3,40,000Cash in Hand50,000
Sundry Creditors 4,00,000Cash at Bank 1,00,000
Bills Payable  1,00,000  
Outstanding Expenses  60,000  
  23,00,000 23,00,000

Calculate the value of goodwill, if it is valued at three years’ purchase of Super Profits.

The solution of Question 28 Chapter 3 of +2-A:

Super ProfitActual average Profit- Normal Profit
Actual average Profit=Average Profit + or -Adjustments (if any)
 =4,00,000- 0 (-)
 =4,00,000

 

Normal Profit=Capital EmployedXNormal Rate of Return
100
 =16,40,000X10
100
 =1,64,000  

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Capital EmployedTotal Assets – Non-Trade Investments- Outside Liabilities
 =23,00,000-1,00,000-5,60,000
 =16,40,000
Super Profit=4,00,000-1,64,000
 =2,36,000



Number of years’ purchase = 3

Goodwill=Super Profit X number of years of purchase
Goodwill=2,36,000X 3
Goodwill =7,08,000

 

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
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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