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प्रश्न
The following particulars are available in respect of the business carried on by a partnership firm:
- Profits earned: 2016: ₹ 25,000; 2017: ₹ 23,000 and 2018: ₹ 26,000.
- Profit of 2016 includes a non-recurring income of ₹ 2,500.
- Profit of 2017 is reduced by ₹ 3,500 due to stock destroyed by fire.
- The stock was not insured. But, it is decided to insure the stock in the future. The insurance premium is estimated to be ₹ 250 per annum.
You are required to calculate the value of goodwill of the firm on the basis of 2 years purchase of average profits of the last three years.
उत्तर
Calculation of adjusted profit
| Particulars | 2016 (₹) | 2017 (₹) | 2018 (₹) |
| Profit | 25,000 | 23,000 | 26,000 |
| (−) Non-recurring income | 2,500 | - | - |
| 22,500 | 23,000 | 26000 | |
| (+) Stock destroyed fire | - | 3,500 | - |
| 22,500 | 26,500 | 26,000 | |
| (−) Insurance premium | 250 | 250 | 250 |
| Profit after adjustments | 22,250 | 26,250 | 25,750 |
Total profit = 22,250 + 26,250 + 25,750 = ₹ 74,250
Average profit = `"Total profit"/"Number of years"`
= `(74250)/3`
= ₹ 24,750
Valuation of goodwill = Average profit × No. of year purchase
= ₹ 24,750 × 2
= ₹ 49,500
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संबंधित प्रश्न
Explain various methods of valuation of goodwill.
Calculate value of goodwill on the basis of three years' purchase of average profit of the preceding five years which were as follows:
| Year | 2018-19 | 2017-18 | 2016-17 | 2015-16 | 2014-15 |
| Profits (₹) | 8,00,000 | 15,00,000 | 18,00,000 | 4,00,000 (Loss) |
13,00,000 |
Sumit purchased Amit's business on 1st April, 2019. Goodwill was decided to be valued at two years' purchase of average normal profit of last four years. The profits for the past four years were:
| Year Ended | 31st March, 2016 | 31st March, 2017 | 31st March, 2018 | 31st March, 2019 |
| Profits (₹) | 80,000 | 145,000 | 160,000 | 200,000 |
Books of Account revealed that:
(i) Abnormal loss of ₹ 20,000 was debited to Profit and Loss Account for the year ended 31st March, 2016.
(ii) A fixed asset was sold in the year ended 31st March, 2017 and gain (profit) of ₹ 25,000 was credited to Profit and Loss Account.
(iii) In the year ended 31st March, 2018 assets of the firm were not insured due to oversight. Insurance premium not paid was ₹ 15,000.
Calculate the value of goodwill.
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.
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.
Ajeet and Baljeet are partners in a firm. Their capitals are ₹ 9,00,000 and ₹ 6,00,000 respectively. During the year ended 31st March, 2019 the firm earned a profit of ₹ 4,50,000. Assuming that the normal rate of return is 20%, calculate value of goodwill of the firm:
(i) By Capitalisation Method; and
(ii) By Super Profit Method if the goodwill is valued at 2 years' purchase of super profit.
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.
How is goodwill calculated under the super profits method?
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.
