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प्रश्न
A partnership firm earned net profits during the last three years as follows:
2016: ₹ 20,000; 2017: ₹ 17,000 and 2018: ₹ 23,000
The capital investment of the firm throughout the above mentioned period has been ₹ 80,000. Having regard to the risk involved, 15% is considered to be a fair return on capital employed in the business. Calculate the value of goodwill on the basis of 2 years purchase of super profit.
उत्तर
Calculation of average profit Year Profit
| Year | Profit |
| 2016 | 20,000 |
| 2017 | 17,000 |
| 2018 | 23,000 |
| Total profit | 60,000 |
Average Profit = `"Total profit"/"Number of years"`
= `(60,000)/3`
= ₹ 20,000
Normal profit = Capital employed × Normal rate of return
= `80,000 xx 15/100`
= ₹ 12,000
Super profit = Average Profit – Normal profit
= 20,000 – 12,000
= 8,000
Valuation of goodwill = Super profit × No. of years purchase
= ₹ 8,000 × 2
= ₹ 16,000
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संबंधित प्रश्न
Calculate goodwill of a firm on the basis of three years' purchase of the Weighted Average Profit of the last four years. The profits of the last four financial years ended 31st March, were: 2016 − ₹ 25,000; 2017 − ₹ 27,000; 2018 − ₹ 46,900 and 2019 − ₹ 53,810. The weights assigned to each year are: 2016 − 1; 2017 − 2; 2018 − 3; 2019 − 4. You are supplied the following information:
(i) On 1st April, 2016, a major plant repair was undertaken for ₹ 10,000 which was charged to revenue. The said sum is to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% on Reducing Balance Method.
(ii) The Closing Stock for the years ended 31st March, 2017 and 2018 were overvalued by ₹ 1,000 and ₹ 2,000 respectively.
(iii) To cover management cost an annual charge of ₹ 5,000 should be made for the purpose of goodwill valuation.
Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3 : 2. They admit Ramesh into partnership for 1/4th share in profits. Ramesh brings in his share of goodwill in cash. Goodwill for this purpose shall be calculated at two years' purchase of the weighted average normal profit of past three years. Weights being assigned to each year 2017−1; 2018−2 and 2019−3. Profits of the last three years were:
2017 − Profit ₹ 50,000 (including profits on sale of assets ₹ 5,000).
2018 − Loss ₹ 20,000 (including loss by fire ₹ 35,000).
2019 − Profit ₹ 70,000 (including insurance claim received ₹ 18,000 and interest on investments and dividend received ₹ 8,000).
Calculate the value of goodwill. Also, calculate the goodwill brought in by Ramesh.
Mahesh and Suresh are partners and they admit Naresh into partnership. They agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits for the last five years. They assigned weights from 1 to 5 beginning from the earliest year and onwards. The profits for the last five years were as follows:
| Year Ended | 31st March, 2015 | 31st March, 2016 | 31st March, 2017 | 31st March, 2018 | 31st March, 2019 |
| Profits (₹) | 1,25,000 | 1,40,000 | 1,20,000 | 55,000 | 2,57,000 |
Scrutiny of books of account revealed the following:
(i) A second-hand machine was purchased for ₹ 5,00,000 on 1st July, 2017 and ₹ 1,00,000 were spent to make it operational. ₹ 1,00,000 were wrongly debited to Repairs Account. Machinery is depreciated @ 20% p.a. on Written Down Value Method.
(ii) Closing Stock as on 31st March, 2018 was undervalued by ₹ 50,000.
(iii) Remuneration to partners was to be considered as charge against profit and remuneration of ₹ 20,000 p.a. for each partner was considered appropriate.
Calculate the value of goodwill.
A partnership firm earned net profits during the last three years ended 31st March, as follows: 2017 − ₹ 17,000; 2018 − ₹ 20,000; 2019 − ₹ 23,000.
The capital investment in the firm throughout the above-mentioned period has been ₹ 80,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital. Calculate value of goodwill on the basis of two years' purchase of average super profit earned during the above-mentioned three years.
A partnership firm earned net profits during the past three years as follows:
| Year ended | 31st March, 2019 | 31st March, 2018 | 31st March, 2017 |
| Net Profit (₹) | 2,30,000 | 2,00,000 | 1,70,000 |
Capital investment in the firm throughout the above-mentioned period has been ₹ 4,00,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital. The remuneration of the partners during this period is estimated to be ₹ 1,00,000 p.a.
Calculate value of goodwill on the basis of two years' purchase of average super profit earned during the above-mentioned three year
A business earned an average profit of ₹ 8,00,000 during the last few years. The normal rate of profit in the similar type of business is 10%. The total value of assets and liabilities of the business were ₹ 22,00,000 and ₹ 5,60,000 respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at `2 1/2` years' purchase of super profits.
Rajan and Rajani are partners in a firm. Their capitals were Rajan ₹ 3,00,000; Rajani ₹ 2,00,000. During the year 2018−19, the firm earned a profit of ₹ 1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20%.
Kabir and Farid are partners in firm sharing profits in the ratio of 3: 1 on 1-4-2019 they admitted Manik into partnership for 1/4th share in the profits of the firm. Manik brought his share of goodwill premium in cash. Goodwill of the firm was valued on the basis of 2 years purchase of the last three years' average profits. The profits of last three years were:
| 2016-17 | ₹ 90,000 |
| 2017-18 | ₹ 1,30,000 |
| 2018-19 | ₹ 86,000 |
During the year 2018-19, there was a loss of ₹ 20,000 due to fire which was not accounted for while calculating the profit. Calculate the value of goodwill and pass the necessary journal entries to the treatment of goodwill.
From the following information, calculate the value of goodwill under the annuity method:
| Particulars | ₹ |
| Average profit | 14,000 |
| Normal Profit | 4,000 |
| Normal rate of return | 15% |
| Years of purchase of goodwill | 5 |
Present value of ₹ 1 for 5 years at 15% per annum as per the annuity table is 3.352
What is the need for the valuation of goodwill?
