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Question 38 Chapter 3 of +2-A
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Table of Contents
38. A business has earned average profit of 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are 10,00,000 and its external liabilities are 1,80,000. The normal rate of return is 10%.
The solution of Question 38 Chapter 3 of +2-A:
| Capitalized Value of Profit | = | Profit X 100 |
| Normal Rate of Return |
| = | 1,00,000X 100 | |
| 10 | ||
| = | 10,00,000 |
| Actual Capital | = | Total Assets – Outsider Liabilities |
| = | 10,00,000 – 1,80,000 | |
| = | 8,20,000 |
| Goodwill | = | Capitalized value of Profit – Actual Capital |
| = | 10,00,000 – 8,20,000 | |
| = | 1,80,000 |
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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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