हिंदी

Calculate Value of Goodwill of the Firm by Applying Capitalisation Method - Accountancy

Advertisements
Advertisements

प्रश्न

From the following information, calculate value of goodwill of the firm by applying Capitalisation Method: Total Capital of the firm ₹ 16,00,000.
Normal rate of return 10%. Profit for the year ₹ 2,00,000.

योग

उत्तर

Goodwill = Capitalised Value of Profit - Actual Capital

Capitalised Value of Profit = `["Profit" xx 100]/"Normal rate of Return"`
= `[ 2,00,000 xx 100 ]/10`

= Rs. 20,00,000.

Total Capital = Rs 16,00,000
∴ Goodwill = 20,00,000 - 16,00,000 = Rs. 4,00,000.

shaalaa.com
Methods of Valuation of Goodwill
  क्या इस प्रश्न या उत्तर में कोई त्रुटि है?
अध्याय 3: Goodwill: Nature and Valuation - Exercises [पृष्ठ ३४]

APPEARS IN

टीएस ग्रेवाल Accountancy - Double Entry Book Keeping Volume 1 [English] Class 12
अध्याय 3 Goodwill: Nature and Valuation
Exercises | Q 37 | पृष्ठ ३४

संबंधित प्रश्न

Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs. 3,00,000; Rajani Rs. 2,00,000. During the year 2015 the firm earned a profit of Rs. 1,50,000. Calculate the value of goodwill of the firm assuming that the normal rate of return is 20%?


Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average profit of the last three years. The profit for first year was ₹ 1,00,000, profit for the second year was twice the profit of the first year and for the third year profit was one and half times of the profit of the second year.


A and B are partners sharing profits and losses in the ratio of 5 : 3. On 1st April, 2019, C is admitted to the partnership for 1/4th share of profits. For this purpose, goodwill is to be valued at two years' purchase of last three years' profits (after allowing partners' remuneration). Profits to be weighted 1 : 2 : 3, the greatest weight being given to last year. Net profit before partners' remuneration were: 2016-17 : ₹ 2,00,000; 2017-18 : ₹ 2,30,000; 2018-19 : ₹ 2,50,000. The remuneration of the partners is estimated to be ₹ 90,000 p.a. Calculate amount of goodwill.


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.


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:

  1. 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.
  2. The closing stock for the year 2016-17 was overvalued by ₹ 12,000.
  3. To cover management costs, an annual charge of ₹ 24,000 should be made for the purpose of goodwill valuation.
  4. 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.

Capital of the firm of Sharma and Verma is ₹ 2,00,000 and the market rate of interest is 15%. Annual salary to partners is ₹ 12,000 each. The profits for the last three years were ₹ 60,000; ₹ 72,000 and ₹ 84,000. Goodwill is to be valued at 2 years' purchase of last 3 years' average super profit.
Calculate goodwill of the firm.


Average profit of the firm is ₹ 2,00,000. Total assets of the firm are ₹ 15,00,000 whereas Partners' Capital is ₹ 12,00,000. If normal rate of return in a similar business is 10% of the capital employed, what is the value of goodwill by Capitalisation of Super Profit?


Average profit of GS & Co. is ₹ 50,000 per year. Average capital employed in the business is ₹ 3,00,000. If the normal rate of return on capital employed is 10%, calculate goodwill of the firm by:
(i) Super Profit Method at three years' purchase; and
(ii) Capitalisation of Super Profit Method.


Super profit is the difference between _____________.


The average rate of return of similar concerns is considered as __________.


Identify the incorrect pair


From the following information, calculate the value of goodwill on the basis of 3 years purchase of average profits of last four years.

Year Result Amount (₹)
2015 Profit 5,000
2016 Profit 8,000
2017 Loss 3,000
2018 Profit 6,000

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.


Compute average profit from the following information.

2016: ₹ 8,000; 2017: ₹ 10,000; 2018: ₹ 9,000


What is the need for the valuation of goodwill?


Name the method under which the goodwill is valued at the agreed number of 'years' purchase of the average profits of the past few years?


A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in a similar business is 10%. Ascertain the value of goodwill by capitalization average profits method, given that the value of net assets of the business is Rs. 8,20,000.


Average profits of a firm during the last few years are ₹ 50,000 and the normal rate of return in a similar business is 5%. If the goodwill of the firm is ₹ 1,00,000 at 5 years' purchases of super profit, find the capital employed by the firm.


Identify the formula for calculating goodwill with the help of the Average Profit Method.


Share
Notifications

Englishहिंदीमराठी


      Forgot password?
Use app×