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

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)

• 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

This site uses Akismet to reduce spam. Learn how your comment data is processed.