Question 34 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 34 Chapter 3 of +2-A

Question 34 Chapter 3 of +2-A

34. Average profit earned by a firm is 1,00,000 which includes undervaluation of stock of 40,000 on an average basis. The capital invested in the business is 6,30,000 and the normal rate of return is 5%. Calculate goodwill of the firm on the basis of 5 times the super profit.

 

The solution of Question 34 Chapter 3 of +2-A

:

Super Profit Actual average Profit – Normal Profit
Actual average Profit = Average Profit + or – Adjustments (if any)
  = 1,00,000 +40,000 (average undervaluation of stock)
  = 1,40,000

 

Normal Profit = Capital Employed X Normal Rate of Return
100
  = 6,30,000 X 5
100
  = 31,500    

 

Super Profit = 1,40,000- 31,500
  = 1,08,500

 

Number of years’ purchase = 5

Goodwill = Super Profit X  Number of years’ purchase
  = 1,08,500 X 5
  = 5,42,500

 

 



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 34 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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