Question 46 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 46 Chapter 3 of +2-A

Question 46 Chapter 3 of +2-A

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

 

 

The solution of Question 46 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

 

Goodwill
(Capitalized Value of Super Profit)
= Super Profit X 100
Normal Rate of Return
  = 72,000 X 100
10
  = 7,20,000

 

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

Goodwill = Super Profit X Numbers of years of purchases
  = 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)

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 - Question 46 Chapter 3 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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