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प्रश्न
Calculate the goodwill of a firm on the basis of three years' purchase of the weighted average profit of the last four years. The appropriate weights to be used and profits are:
| Year | 2015-16 | 2016-17 | 2017-18 | 2018-19 |
| Profits (₹) | 1,01,000 | 1,24,000 | 1,00,000 | 1,40,000 |
| Weights | 1 | 2 | 3 | 4 |
On a scrutiny of the accounts, the following matters are revealed:
- On 1st December, 2017, a major repair was made in respect of the plant incurring ₹ 30,000, which was charged to revenue. The said sum is agreed to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% p.a. on the Reducing Balance Method.
- The closing stock for the year 2016-17 was overvalued by ₹ 12,000.
- To cover management costs, an annual charge of ₹ 24,000 should be made for the purpose of goodwill valuation.
- On 1st April, 2016, a machine having a book value of ₹ 10,000 was sold for ₹ 11,000 but the proceeds were wrongly credited to the Profit and Loss Account. No effect has been given to rectify the same. Depreciation is charged on machine @ 10% p.a. on reducing balance method.
उत्तर
| Particulars | 2015-16 | 2016-17 | 2017-18 | 2018-19 |
| Profits | 1,01,000 | 1,24,000 | 1,00,000 | 1,40,000 |
| Repair Capitalised | 30,000 | |||
| (−) Depreciation | (1,000) | (2,900) | ||
| (−) Overvaluation of Closing Stock | (12,000) | |||
| Overvaluation of Closing Stock | 12,000 | |||
| Management Cost | (24,000) | (24,000) | (24,000) | (24,000) |
| Sale Proceeds | (10,000) | |||
| Wrong Depreciation | 810 | |||
| Adjusted Profits | 77,000 | 78,000 | 1,17,900 | 1,13,910 |
| Weights | 1 | 2 | 3 | 4 |
| Product | 77,000 | 1,56,0000 | 3,53,700 | 4,55,640 |
Working Notes:
Depreciation on Plant:
| Particulars | ₹ |
| Original Cost | 30,000 |
| (−) Depreciation @ 10% for 4 months (2017-18) | (1000) |
| Written-down value | 29,000 |
| (−) Depreciation @ 10% (2018-19) | (2900) |
| Written-down value | 26,100 |
Depreciation on Machinery:
| Particulars | ₹ |
| Cost of Machine | 10,000 |
| (−) Depreciation for (2016-17) @ 10% | (1000) |
| Written-down value | 9,000 |
| (−) Depreciation for @ 10% (2017-18) | (900) |
| Written-down value | 8,100 |
| (−) Depreciation for @ 10% (2017-18) | 810 |
Weighted average profit = `"Total of weighted profit"/"Total of weighs"`
= `(77000 + 156000 + 353700 + 455640)/(1 + 2 + 3 + 4)`
= `1042340/10`
= 104234
Goodwill = Weighted average profit × No. of years purchase
= 104234 × 3
= 312702
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संबंधित प्रश्न
Capital employed in a business is Rs. 2,00,000. The normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?
The books of Ram and Bharat showed that the capital employed on 31.12.2016 was Rs. 5,00,000 and the profits for the last 5 years : 2015 Rs. 40,000; 2014 Rs. 50,000; 2013 Rs. 55,000; 2012 Rs. 70,000 and 2011 Rs. 85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profits of the last 5 years assuming that the normal rate of return is 10%?
Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits of last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively to profits for the year ended 31st March, 2015 to 2019. The profits for these years were: ₹ 70,000, ₹ 1,40,000, ₹ 1,00,000, ₹ 1,60,000 and ₹ 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(i) There was an abnormal loss of ₹ 20,000 in the year ended 31st March, 2015.
(ii) There was an abnormal gain (profit) of ₹ 30,000 in the year ended 31st March, 2016.
(iii) Closing Stock as on 31st March, 2018 was overvalued by ₹ 10,000.
Calculate the value of goodwill.
Average profit earned by a firm is ₹ 80,000 which includes undervaluation of stock of ₹ 8,000 on an average basis. The capital invested in the business is ₹ 8,00,000 and the normal rate of return is 8%. Calculate goodwill of the firm on the basis of 7 times the super profit.
Average net profit expected in future by XYZ firm is ₹ 36,000 per year. Average capital employed in the business by the firm is ₹ 2,00,000. The normal rate of return from capital invested in this class of business is 10%. Remuneration of the partners is estimated to be ₹ 6,000 p.a. Calculate the value of goodwill on the basis of two years' purchase of super profit.
Average profit earned by a firm is ₹ 1,00,000 which includes undervaluation of stock of ₹ 40,000 on an average basis. The capital invested in the business is ₹ 6,30,000 and the normal rate of return is 5%. Calculate goodwill of the firm on the basis of 5 times the super profit.
Ayub and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April, 2019. They agreed to value goodwill at 3 years' purchase of Super Profit Method for which they decided to average profit of last 5 years. The profits for the last 5 years were:
| Year Ended | Net Profit (₹) | |
| 31st March, 2015 | 1,50,000 | |
| 31st March, 2016 | 1,80,000 | |
| 31st March, 2017 | 1,00,000 | (Including abnormal loss of ₹ 1,00,000) |
| 31st March, 2018 | 2,60,000 | (Including abnormal gain (profit) of ₹ 40,000) |
| 31st March, 2019 | 2,40,000 |
The firm has total assets of ₹ 20,00,000 and Outside Liabilities of ₹ 5,00,000 as on that date. Normal Rate of Return in similar business is 10%. Calculate value of goodwill.
Form the following particulars, calculate value of goodwill of a firm by applying Capitalisation of Average Profit Method:
(i) Profits of last five consecutive years ending 31st March are: 2019 − ₹ 54,000; 2018 − ₹ 42,000; 2017 − ₹ 39,000; 2016 − ₹ 67,000 and 2015 − ₹ 59,000.
(ii) Capitalisation rate 20%.
(iii) Net assets of the firm ₹ 2,00,000.
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%.
From the following information, calculate value of goodwill of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average profit.
Information:
(a) Average Capital Employed is ₹ 6,00,000.
(b) Net Profit/(Loss) of the firm for the last three years ended are:
31st March, 2018 − ₹ 2,00,000, 31st March, 2017 − ₹ 1,80,000, and 31st March, 2016 − ₹ 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of ₹ 1,00,000 to partners is to be taken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is ₹ 7,00,000 whereas Partners' Capital is ₹ 6,00,000 and Outside Liabilities ₹ 1,00,000.
Which of the following is true?
From the following information relating to a partnership firm, find out the value of its goodwill based on 3 years purchase of average profits of the last 4 years:
- Profits of the years 2015, 2016, 2017 and 2018 are ₹ 10,000, ₹ 12,500, ₹ 12,000 and ₹ 11,500 respectively.
- The business was looked after by a partner and his fair remuneration amounts to ₹ 1,500 per year. This amount was not considered in the calculation of the above profits.
Find out the value of goodwill at three years purchase of weighted average profit of last four years.
| Year | Profit ₹ |
Weight |
| 2015 | 10,000 | 1 |
| 2016 | 12,000 | 2 |
| 2017 | 16,000 | 3 |
| 2018 | 18,000 | 4 |
From the following details, calculate the value of goodwill at 2 years purchase of super profit:
- Total assets of a firm are ₹ 5,00,000
- The liabilities of the firm are ₹ 2,00,000
- Normal rate of return in this class of business is 12.5%.
- Average profit of the firm is ₹ 60,000.
Compute average profit from the following information.
2016: ₹ 8,000; 2017: ₹ 10,000; 2018: ₹ 9,000
If average capital employed in a firm is ₹8,00,000, average of actual profits is ₹1,80,000 and normal rate of return is10%, then value of goodwill as per capitalization of average profits is ______.
What is the need for the valuation of goodwill?
What are the methods of valuation of goodwill?
Under this method, the value of goodwill is ascertained by deducting the actual capital employed (net assets) in the business from the capitalized value of the average profits on the basis of the normal rate of return.
