Question 31 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 31 Chapter 3 of +2-A

Question 31 Chapter 3 of +2-A

31. Capital of the firm of Sharma and Verma is 2,00,000 and the market rate of interest is 15%. Annual salary to partners is 12,000 each. The profits for the last three years were 60,000; 72,000 and 84,000. Goodwill is to be valued at 2 years’ purchase of the last 3 years’ average super profit.
Calculate the goodwill of the firm.

 

The solution of Question 31 Chapter 3 of +2-A

:

Year
Profit before
Partners’
Remuneration
A

Partners’
Remuneration
D

Actual Profit
after
Remuneration
(C = A – B)


2017 60,000 24,000 36,000
2018 72,000 24,000 48,000
2019 84,000 24,000 60,000
Total 1,44,000

 

Super Profit Actual average Profit- Normal Profit
Actual average Profit = Total Profit for past given years
  = Number of years
  = 1,44,000
3
  = 48,000

 

Normal Profit = Capital Employed X Normal Rate of Return
100
  = 2,00,000 X 15
100
  = 30,000    

 

Super Profit = 48,000- 30,000
  = 18,000



Number of years’ purchase = 2

Goodwill = Super Profit X number of years’ purchase
Goodwill = 18,000 x 2
Goodwill  = 36,000





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

 

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2 Book 1 min - Question 31 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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