# Question 29 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 29 Chapter 3 of +2-A

29. Varuna and Karuna are partners for equal shares. They admit Lata into a partnership for 1/4th share. It was agreed to value the goodwill of the firm at 4 years’ purchase of super profit. The normal rate of return is 15% of the capital employed. Average profit of the firm is 4,00,000. Balance Sheet of the firm as at 31st March 2019 was as follows:

 Liabilities Amount Assets Amount Capital A/cs: Furniture 4,00,000 Varuna 5,00,000 Computers 3,00,000 Karuna 5,00,000 10,00,000 Investments Trade 2,00,000 Long-term Loan 5,50,000 Stock 3,00,000 Sundry Creditors 2,00,000 Sundry Debtors 3,00,000 Outstanding Expenses 50,000 Bills Receivable 50,000 Advances from Customers 1,50,000 Cash in Hand 50,000 Cash at Bank 2,00,000 Deferred Revenue Expenditure: Advertisement Suspense 50,000 19,50,000 23,00,000

Calculate the value of goodwill

The solution of Question 29 Chapter 3 of +2-A

:

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

 Normal Profit = Capital Employed X Normal Rate of Return 100
 = 15,00,000 X 15 100 = 2,25,000

 Capital Employed = Total Assets –Fictitious Assets-Current Liabilities = 19,50,000-50,000-4,00,000 = 15,00,000 Super Profit = 4,00,000 – 2,25,000 = 1,75,000

Number of years’ purchase = 4

 Goodwill = Super Profit X number of years’ purchase Goodwill = 1,75,000 X 4 Goodwill = 7,00,000

### 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

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