Question 45 Chapter 3 of +2-A - T.S. Grewal 12 Class Part

Question 45 Chapter 3 of +2-A

Table of Contents

The solution of Question 45 Chapter 3 of +2-A:

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

45. Average profit of GS & Co. is 50,000 per year. Average capital employed in the
business is 3,00,000. If the normal rate of return on capital employed is 10%, calculate goodwill of the firm by:

Super Profit Method at three years’ purchase; and
Capitalisation of Super Profit Method.

The solution of Question 45 Chapter 3 of +2-A:

Normal Profit	=	Capital Employed	X	Normal Rate of Return
				100

=	3,00,000	X	10
			100
=	30,000

Super Profit	=	Actual Profit – Normal Profit
	=	50,000 – 30,000
	=	20,000

(i) Super Profit Method at three years’ purchase

Goodwill	=	Super Profit X Numbers of years of purchases
	=	20,000 X 3
	=	60,000

Goodwill	=	Super Profit	X	100
				Normal Rate of Return

=	20,000	X	100
			20
=	2,00,000

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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)

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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