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

Question 40 Chapter 3 of +2-A

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 Employed X Normal Rate of Return 100
 = 32,80,000 X 10 100 = 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

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

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

### 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. 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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