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Question 4 Chapter 3 of Class 12 Part – 1
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4. Kaku purchased Polu’s business on 1st April, 2018. The profits for the last five years are:
31st March, 2014- Rs. 37,000
31st March, 2015- Rs. 47,000 (after charging an abnormal loss of theft of Rs. 4,000)
31st March, 2016- Rs. 53,000 (including an abnormal gain of Rs. 5,000)
31st March, 2017- Rs. 60,000 (including a profit of lottery Rs. 6,000)
31st March, 2018- Rs. 70,000 (after charging Rs. 10,000 a loss of furniture destroyed by fire)
Calculate the value of goodwill on the basis of two years purchase of the average profit of the last five years.
The solution of Question 4 Chapter 3 of Class 12 Part – 1: –
| Particulars | 31st March , 2014 | 31st March, 2015 | 31st March , 2016 | 31st March , 2017 | 31st March, 2018 |
| Net Profit | 37,000 | 47,000 | 53,000 | 60,000 | 70,000 |
| Add: Abnormal Loss | – | 4,000 | – | – | – |
| Less: Abnormal Gain | – | – | 5,000 | – | – |
| Less: Profit of Lottery | – | – | – | 6,000 | – |
| Add: Loss by Fire | – | – | – | – | 10,000 |
| Adjusted Profit | 37,000 | 51,000 | 48,000 | 54,000 | 80,000 |
| Average Profit | = | Total Profits |
| Number of years | ||
| = | 37,000+51,000+48,000+54,000+80,000 | |
| 5 | ||
| = | 2,70,000 | |
| 5 | ||
| = | 54,000 |
Goodwill = Average Profit x Number of Years’ Purchase = 54,000 x 2 = Rs. 1,08,000.
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Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
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