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Question 40 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 40 Chapter 3 of +2-A
Question No.40 Chapter No.3 - T.S. Grewal +2 Book 2019-Solution

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Question 40 Chapter 3 of +2-A

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40. A business has earned average profit of 4,00,000 during the last few years and the normal rate of return in similar business is 10%. Find value of goodwill by

  1. Capitalisation of Super Profit Method, an
  2. Super Profit Method if the goodwill is valued at 3 years’ purchase of super profits
  3. Assets of the business were 40,00,000 and its external liabilities 7,20,000.

The solution of Question 40 Chapter 3 of +2-A:

Capital Employed=Total Assets – Creditors
 =40,00,000 – 7,20,000
 =32,80,000
Normal Profit=Capital EmployedXNormal Rate of Return
100
 =32,80,000X10
100
 =3,28,000  

 

Super Profit=Actual Profit – Normal Profit
 =4,00,000- 3,28,000
 =72,000

(i) Capitalisation of Super Profit Method: –

Capitalized Value of Average Profit=Profit X 100
Normal Rate of Return
 =72,000X 100
20
 =7,20,000

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(ii) Super Profit Method if the goodwill is valued at 3 years’ purchase of super profits

Goodwill=Super Profit x Number of years of purchase
 =72,000 x 3
 =2,16,000

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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
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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