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प्रश्न
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.
उत्तर
|
Particulars |
Year |
31st Mar., 2015(₹) |
31st Mar., 2016(₹) |
31st Mar., 2017(₹) |
31st Mar., 2018(₹) |
31st Mar., 2019(₹) |
|
Profit |
1,25,000 |
1,40,000 |
1,20,000 |
55,000 |
2,57,000 |
|
|
Add: Repairs on new machine wrongly |
|
|
|
1,00,000 |
|
|
|
debited |
|
|
|
|
|
|
|
Less: Depreciation on Machine (20% p.a.) |
|
|
|
15,000 |
17,000 |
|
|
Add: Undervaluation of Closing Stock |
|
|
|
50,000 |
|
|
|
Less: Undervaluation of Opening Stock |
|
|
|
|
50,000 |
|
|
Less: Remuneration to Partners |
40,000 |
40,000 |
40,000 |
40,000 |
40,000 |
|
|
Normal Profit/Loss |
85,000 |
1,00,000 |
80,000 |
1,50,000 |
1,50,000 |
|
|
Year |
Normal Profits (₹) |
Weights |
Weighted Profits (₹) |
|
31st Mar., 2015 |
85,000 |
1 |
85,000 |
|
31st Mar., 2016 |
1,00,000 |
2 |
2,00,000 |
|
31st Mar., 2017 |
80,000 |
3 |
2,40,000 |
|
31st Mar., 2018 |
1,50,000 |
4 |
6,00,000 |
|
31st Mar., 2019 |
1,50,000 |
5 |
7,50,000 |
|
Total |
15 |
18,75,000 |
|
Weighted Average Profits = `("Total of Weighted Profits"/"Total of Weights")` = Rs. `( [18,75,000]/15)` = Rs. 1,25,000
Goodwill = Weightes Average Profits x No. of Years of Purchase
= Rs. ( 1,25,000 x 3 )
= Rs. 3,75,000
APPEARS IN
संबंधित प्रश्न
Explain various methods of valuation of goodwill.
Bharat and Bhushan are partners sharing profits in the ratio of 3 : 2. They decided to admit Manu as a partner from 1st April, 2019 on the following terms:
(i) Manu will be given 2/5th share of the profit.
(ii) Goodwill of the firm will be valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
2019 - Profit ₹ 30,000 (after debiting loss of stock by fire ₹ 40,000).
2018 - Loss ₹ 80,000 (includes voluntary retirement compensation paid ₹ 1,10,000).
2017 - Profit ₹ 1,10,000 (including a gain (profit) of ₹ 30,000 on the sale of fixed assets).
Calculate the value of goodwill.
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.
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.
Supreet and Shubham are equal partners. They decide to admit Akriti for 1/3rd share. For the purpose of admission of Akriti, goodwill of the firm is to be valued at four years' purchase of super profit. Average capital employed in the firm is ₹ 1,50,000. Normal rate of return may be taken as 15% p.a. Average profit of the firm is ₹ 40,000. Calculate value of goodwill.
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.
On 1st April, 2019, an existing firm had assets of ₹ 75,000 including cash of ₹ 5,000. Its creditors amounted to ₹ 5,000 on that date. The firm had a Reserve of ₹ 10,000 while Partners' Capital Accounts showed a balance of ₹ 60,000. If Normal Rate of Return is 20% and goodwill of the firm is valued at ₹ 24,000 at four years' purchase of super profit, find average profit per year of the existing firm.
On 1st April, 2018, a firm had assets of ₹ 1,00,000 excluding stock of ₹ 20,000. The current liabilities were ₹ 10,000 and the balance constituted Partners' Capital Accounts. If the normal rate of return is 8%, the Goodwill of the firm is valued of ₹ 60,000 at four years' purchase of super profit, find the actual profits of the firm.
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.
Which of the following is true?
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 |
Find out the value of goodwill by capitalising super profits:
- Normal Rate of Return 10%
- Profits for the last four years are ₹ 30,000, ₹ 40,000, ₹ 50,000 and ₹ 45,000.
- A non-recurring income of ₹ 3,000 is included in the above mentioned profit of ₹ 30,000.
- Average capital employed is ₹ 3,00,000.
What is super profit?
How is the value of goodwill calculated under the capitalisation method?
When we use the super profit method for goodwill Valuation:
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?
The following steps are of which method of goodwill:
- Calculate the average profit.
- Calculate the normal profit on the capital employed on the basis of the normal rate of return.
- Calculate the super-profits by deducting normal profit from the average profits, and
- Calculate goodwill by multiplying the super-profits by the given number of years' purchase.
The books of a business showed that the capital employed on December 31, 2006, Rs. 5,00,000 and the profits for the last five years were: 1997 Rs. 40,000: 1998 - Rs. 50,000; 1999 - Rs. 55,000; 2000 - Rs. 70,000 and 2001 - Rs. 85,000. You are required to find out the value of goodwill based on 3 years of the purchase of the super-profits of the business, given that the normal rate of return is 10%.
Identify the formula for calculating goodwill with the help of the Average Profit Method.
