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

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)

• 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