Question 42 Chapter 3 of +2-A
Table of Contents
42. On 1st April, 2018, a firm had assets of 1,00,000 excluding stock of 20,000. The current liabilities were 10,000 and the balance constituted Partners’ Capital Accounts. If the normal rate of return is 8%, the Goodwill of the firm is valued of 60,000 at four years’ purchase of super profit, find the actual profits of the firm.
The solution of Question 42 Chapter 3 of +2-A:
| Total Assets of the firm | = | Sundry Assets + Stock |
| = | 1,00,000 + 20,000 | |
| = | 1,20,000 | |
| Capital Employed | = | Total Assets- Current Liabilities |
| = | 1,20,000 – 10,000 | |
| = | 1,10,000 |
| Normal Profit | = | Capital Employed | X | Normal Rate of Return |
| 100 |
| = | 1,10,000 | X | 8 | |
| 100 | ||||
| = | 8,800 |
| Super Profit | = | Goodwill |
| Number of years of Purchase |
| = | 60,000 | |
| 4 | ||
| = | 15,000 |
| Average Actual Profit | = | Super Profit + Normal Profit |
| = | 15,000 + 8,800 | |
| = | 23,800 |
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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