Question 30 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 30 Chapter 3 of +2-A

Question 30 Chapter 3 of +2-A

30. A business earned an average profit of 8,00,000 during the last few years.  The normal rate of profit in a similar type of business is 10%. The total value of assets and liabilities of the business were 22,00,000 and 5,60,000 respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at 2 ½ years’ purchase of super-profits.

 

The solution of Question 30 Chapter 3 of +2-A

:

Super Profit Actual average Profit- Normal Profit
Actual average Profit = Average Profit + or -Adjustments (if any)
  = 8,00,000- 0 (-)
  = 8,00,000

 

Normal Profit = Capital Employed X Normal Rate of Return
100
  = 16,40,000 X 10
100
  = 1,64,000    

 

Capital Employed = Total Assets -Outside Liabilities
  = 22,00,000 – 5,60,000
  = 16,40,000
Super Profit = 8,00,000 – 1,64,000
  = 6,36,000



Number of years’ purchase = 2.5

Goodwill = Super Profit X number of years’ purchase
Goodwill = 6,36,000X 2.5
Goodwill  = 15,90,000

 

 



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 30 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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