Question 1

Question 01 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 01 Chapter 3 of +2-Part-1
Average Profit Method
1.  Rana and Soun are sharing profits 11:9 ratio. Their goodwill is to be valued at two years purchase of average profits for the last three years. Profits of last years are Rs.70,000; Rs.30,000 and Rs.50,000.
The solution of Question 01 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf

Average Profit
=
Total Profit for past given years

Number of years

=
70,000 + 30,000 + 50,000

3

Question 2

Question 02 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 02 Chapter 3 of +2-Part-1
2. (Average Profit Method) Partner X is admitted in the firm of A and B for 1/5 share. Calculate new partners share in goodwill on the basis of the following information:

Year 
Profit/Loss
Amount

2011
Profit
30,000

2012
Profit
50,000

2013
Loss
20,000

2014
Profit
40,000

2015
Profit
50,000

Goodwill is two times of the average profit of the last five years.
The solution of Question 02 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45e

Question 3

Question 03 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 03 Chapter 3 of +2-Part-1
3. (Average Profit Method) Calculate goodwill at two years of purchase of average profits of last three years.

Year 
Profit

1
1,500

2
Three times of 1st year profit

3
1½ times profits of second year

The solution of Question 03 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf

Average Profit
=
Total Profit for past given years

Number of years

=
1,500 + 4,500 + 6,750

3

=
12,750

Question 4

Question 04 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 04 Chapter 3 of +2-Part-1
4. (Average Profit Method) Rani purchased Vani’s business on 31st March 2015. The profit disclosed by Vani business for the last three years were as follows:Year 2013: Rs.40,000 (including an abnormal gain Rs.5,000)2014: Rs.50,000(after charging an abnormal loss of Rs.10,000)2015: Rs.45,000(excluding Rs.5,000 as insurance premium of firms property now to be insured)Calculate the value of firm’s Goodwill on the basis of 2 years purchase of the average profit fo

Question 5

Question 05 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 05 Chapter 3 of +2-Part-1
5. (Average Profit Method) Goodwill is to be valued at two years purchase of 3 years normal average profit of the firm. The profit for 2014-15, Rs.20,000 (including insurance claim received of Rs.40,000). The loss for 2015-16 Rs.8,000(including voluntary retirement compensation paid Rs.1,10,000). The profit for 2016-17 Rs.1,05,000 (including a profit of Rs.25,000 on the sale of a fixed asset. Calculate the value of goodwill.
The solution of Question 05 Chapter

Question 6

Question 06 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 06 Chapter 3 of +2-Part-1
6. (Calculate goodwill when partners capital are given) A firm of partner A, B and C has fixed capital of Rs.1,00,000, Rs.80,000 and Rs.1,20,000 respectively. Interest on capital is allowed @10% p.a. The profits of last four years before interest on capital were: I year: Rs.50,000; II Year: Rs.40,000; III year: Rs.70,000; IV year: Rs.60,000. Partners have been allowed salary of Rs.80,000 in total during the above four years.As per agreement goodwill of the fir

Question 7

Question 07 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 07 Chapter 3 of +2-Part-1
7. (Profit & Loss on fixed asset are given) In a firm of partners X and Y, the following was the financial position:2014: Profits Rs.30,000 (including profit on sale of land Rs.40,000)2015: Loss Rs.25,000 (After crediting claim for loss of asset Rs.35,000)2016: Profit Rs.50,000 (Before paying manager’s commission Rs.10,000)2017: Profit Rs.40,000 (including loss on sale of plant Rs.10,000)Goodwill is to be valued two times of average normal profit of last f

Question 8

Question 08 Chapter 3 of USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 08 Chapter 3 of +2-Part-1
8. (Weighted Average Profit Method) The profits of Ram Mills for the last five years were as under:

Year 
Profit/Loss

2015
10,000

2016
20,000

2017
30,000

2018
40,000

2019
60,000

Calculate the value of goodwill is 2 years purchase of average weighted profits. The weights are 1,2,3,4 and 5 in the year of 2015, 2016, 2017, 2018 and 2019.
The solution of Question 08 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf
Calcula

Question 9

Question 09 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 09 Chapter 3 of +2-Part-1
9. (Weighted Average Profit Method) Calculate the value of goodwill of a firm on the basis of three years purchase of the weighted average profit of the last four years. The profits of last four years were:

Year 
Profit/Loss

2014-15
5,000

2015-16
5,200

2016-17
9,300

2017-18
10,700

During 2014-15, there was abnormal loss of Rs.1,000 due to theft and in 2017-18 there was a profit from sale of land amounting to Rs.4,000. In 2015-16, closing stock wa

Question 10

Question 10 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 10 Chapter 3 of +2-Part-1
10. (Super Profit Method) A partnership firm earned net profits during the last three years as follows:

Year 
Profit/Loss

I
17,000

II
20,000

III
23,000

The capital investment in the firm throughout the above mentioned period has been Rs.80,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital.Calculate the value of goodwill on the basis of 2 years purchase of average super profits earned during the above ment

Question 11

Question 11 Chapter 3 of +2 - USHA Publication 12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 11 Chapter 3 of +2- Usha
11. (Super Profit Method) A firm earned net profit during the last five years as follows:(i) Rs.7,000; (ii) Rs.6,500; (iii) Rs.8,000; (iv) Rs.7,500; (v) Rs.6,000. The capital investment of the firm is Rs.40,000. A fair return on capital in the market is 12%. Find out the value of goodwill of the business if it is based on three years purchase of average super-profits of the past five years.
The solution of Question 11 Chapter 3 of +2- Usha: -
https://youtu.be/k

Question 12

Question 12 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 12 Chapter 3 of +2-Part-1
12. (Super Profit Method) A firm has total assets of Rs.2,50,000 including cash of Rs.30,000.The creditors are Rs.40,000. Normal rate of return is 10% on capital employed. Goodwill of the firm is valued at Rs.1,20,000 at four years purchase of super profits. Find the average profits.
The solution of Question 12 Chapter 3 of +2 Part-1: - 
https://youtu.be/kUFbp8Ti064?si=VBs6kx1Q6s-yw2h6&t=366

Capital Employed
=
Total Assets - Liabilities

=
2,50,000 -

Question 13

Question 13 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 13 Chapter 3 of +2-Part-1
13. (Super Profit Method) X and Y have capital of Rs.1,00,000 and Rs.60,000.The reserve are Rs.50,000 and creditors are Rs.10,000. Normal rate of return expected in this type of business is 10%.The goodwill is valued Rs.50,000 at two years purchase of super profit. Find out average profits.
The solution of Question 13 Chapter 3 of +2 Part-1: - 
https://youtu.be/kUFbp8Ti064?si=lnSJX7nRyC7TQm9x&t=581

Capital Employed
=
1,00,000 + 60,000 + 50,000

=
2,1

Question 14

Question 14 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 14 Chapter 3 of +2-Part-1
14. (Super Profit Method) Calculate goodwill at two years purchase of super-profits.

Normal rate of return-10%.
Assets: Machinery Rs.2,00,000; Building Rs.3,00,000; Stock Rs.70,000;
Debtors Rs.25,000; Provision for doubtful debts Rs.5,000; Preliminary expenses Rs.10,000.
Liabilities : Creditors Rs.20,000; Bank Loan Rs.40,000.
Profits : 1st Year Rs.80,000; 2nd Year Rs.1,05,000; 3rd Year Rs.90,000Charge depreciation at 10% p.a. building in 3rd year.

The soluti

Question 15

Question 15 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 15 Chapter 3 of +2-Part-1
15. (Capitalisation Method) The average net profits expected in future by Ram Gopal and Sons are Rs.25,000 per year. The average capital employed in the business by the firm is Rs.1,80,000. The normal rate of return on the capital employed in similar business is 10%. Calculate the goodwill of the firm by the capitalization of the average method.
The solution of Question 15 Chapter 3 of +2 Part-1: - 
https://youtu.be/kUFbp8Ti064?si=RkyvWAfcmkuDyc_K&t=993

Question 16

Question 16 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 16 Chapter 3 of +2-Part-1
16. (Capitalisation Method) A firm earns Rs.1,00,000 as its annual profits, the rate of normal profits being 10%. The assets of the firm amount to Rs.5,00,000 and the liabilities Rs.2,00,000. Find out the value of goodwill by capitalization method.
 
The solution of Question 16 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf

Capital Employed
=
Total Assets - Liabilities

=
5,0,0000 - 2,00,000

=
3,00,000

Value of bu

Question 17

Question 17 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 17 Chapter 3 of +2-Part-1
17. (Capitalisation Method) The average net profits expected in future by Ram Gopal and Sons are Rs.25,000 per year. The average capital employed in the business by the firm is Rs.1,80,000. The normal rate of return on the capital employed in similar business is 10%. Calculate goodwill of the firm by the capitalization of average method.
The solution of Question 17 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf

Capitalised value

Question 18

Question 18 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 18 Chapter 3 of +2-Part-1
18. (Capitalisation of super profit) The assets of a firm are Rs.26,000 and liabilities other than capital are Rs.6,000. The normal rate of profit in this type of business is 12½% whereas the firm earns a profit of Rs.8,400. Calculate the amount of goodwill on the basis of capitalization of the super profit method.
The solution of Question 18 Chapter 3 of +2 Part-1: - 
https://youtu.be/A6gzkpQUioI?si=-45eHN22nr7Xz4hf

Normal Profit
=
Capital Employed
X
Norma

Question 19

Question 19 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 19 Chapter 3 of +2-Part-1
18. (Avg Profit/ Super Profit/Capitalisation method) The following information relates to a partnership firm:
a. Profits for the last six years:- 2013: Rs.18,000(loss); 2014: Rs.30,000; 2015: Rs.25,000; 2016: Rs.55,000; 2017: Rs.65,000; 2018: Rs.95,000
b. Average capital employed Rs.3,00,000
c. Normal rate of profit is 10%Find the value of goodwill on the following basis:
a. Four years purchase of average profit
b. Four years purchase of super profit
c. Capita

Question 20

Question 20 Chapter 3 of +2 Part-1 - USHA Publication  12 Class Part - 1

Sarbjit Singh · Accepted Answer

Question 20 Chapter 3 of +2-Part-1
20. (Super Profit/Capitalisation method) A firm earns a profit of Rs.5,000 per year. The average capital employed in the business by the firm is Rs.25,000. The normal rate of return on the capital employed in similar business is 10%. You are required to calculate goodwill of the firm by a. Super profit method on the basis of three years purchase.b. Capitalisation method (Both super profit & average profit).
The solution of Question 20 Chapter 3 of +2 Part-

USHA Publication +2 Part 1 Solutions Chapter No. 3 -Partnership Accounts – II (Goodwill: Nature and Valuation)

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💡 Double Entry Accounting Principles

Topics & Questions Solved:

Question 01 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

The solution of Question 01 Chapter 3 of +2 Part-1: -

Question 02 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 03 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 04 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 05 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 06 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 07 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 08 Chapter 3 of USHA Publication 12 Class Part - 1

Question 09 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 10 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 11 Chapter 3 of +2 - USHA Publication 12 Class Part - 1

Question 12 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 13 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 14 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 15 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 16 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 17 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 18 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 19 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 20 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 22 Chapter 3 of USHA Publication 12 Class Part - 1

Question 24 Chapter 3 of USHA Publication 12 Class Part - 1

Question 25 Chapter 3 of USHA Publication 12 Class Part - 1

Question 26 Chapter 3 of USHA Publication 12 Class Part - 1

Sarbjit SinghB.Com and M.Com

Average Profit	=	Total Profit for past given years
Average Profit	=	Number of years

	=	70,000 + 30,000 + 50,000
	=	3

	=	1,50,000
	=	3

	=	50,000

Number of years’ purchase	=	2
Goodwill	=	Average Profit X Number of years’ purchase
Goodwill	=	50,000 X 2
Goodwill	=	1,00,000