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Question 39 Chapter 3 of +2-A
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Table of Contents
39. Form the following particulars, calculate the value of goodwill of a firm by applying Capitalisation of Average Profit Method:
- Profits of last five consecutive years ending 31st March are: 2019 − 54,000; 2018 − 42,000; 2017 − 39,000; 2016 − 67,000 and 2015 − 59,000.
- Capitalisation rate 20%.
- Net assets of the firm 2,00,000.
The solution of Question 39 Chapter 3 of +2-A:
| Average Profit | = | Total Product of Profit for past given years |
| Number of years |
| = | 54,000+42,000+ 39,000+67,000+59,000 | |
| 6 | ||
| = | 2,61,000 | |
| 5 | ||
| = | 52,200 |
| Capitalized Value of Average Profit | = | Profit X 100 |
| Normal Rate of Return |
| = | 52,200 X 100 | |
| 20 | ||
| = | 2,61,000 |
| Goodwill | = | Capitalized value of Profit – Actual Capital |
| = | 2,61,000 – 2,00,000 | |
| = | 61,000 |
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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