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प्रश्न
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.
उत्तर
Goodwill = Super Profit x No. of Years' Purchase
= 48,000 x 3 = Rs. 1,44,000.
Working Notes:
WN: 1 Calculation of Normal Profits:
|
Year |
Profit/(Loss) (Rs) |
Adjustment |
Normal Profit (₹) |
|
31 March, 2015 |
1,50,000 |
- |
1,50,000 |
|
31 March, 2016 |
1,80,000 |
- |
1,80,000 |
|
31 March, 2017 |
1,00,000 |
1,00,000 |
2,00,000 |
|
31 March, 2018 |
2,60,000 |
(40.000) |
2,20,000 |
|
31 March, 2019 |
2,40,000 |
- |
2,40,000 |
|
|
|
Total Profit |
9,90,000 |
WN2: Calculation of Super Profits
table attributes columnalign left end attributes row cell text Average Profit end text equals fraction numerator text Total Profit of past given years end text over denominator text Number of Years end text end fraction end cell row cell text end text equals fraction numerator 9 comma 90 comma 000 over denominator 5 end fraction equals text ₹ 1,98,000 end text end cell row cell text Normal Profit end text equals text Capital Employed end text cross times fraction numerator text Normal Rate of Return end text over denominator 100 end fraction end cell row cell text end text equals text 15,00,000 end text cross times 10 over 100 equals text ₹ 1,50,000 end text end cell row cell text Super Profit end text equals text Average Profit end text minus text Normal Profit end text end cell row cell text end text equals text 1,98,000 end text minus text 1,50,000 end text equals text ₹ 48,000 end text end cell end table.
WN3: Calculation of Capital Employed
Capital Employed = Total Assets - Outside Liabilities
= 20,00,000 - 5,00,000 = Rs. 15,00,000.
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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 |
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.
Purav and Purvi are partners in a firm, sharing profits and losses in the ratio of 2 : 1. They decide to take Parv into partnership for 1/4th share on 1st April, 2019. For this purpose, goodwill is to be valued at four times the average annual profit of the previous four or five years, whichever is higher. The agreed profits for goodwill purpose of the past five years are:
| Year | 2014-15 | 2015-16 | 2016-17 | 2017-18 | 2018-19 |
| Profits (₹) | 14,000 | 15,500 | 10,000 | 16,000 | 15,000 |
Calculate the value of goodwill.
Geet and Meet are partners in a firm. They admit Jeet into partnership for equal share. It was agreed that goodwill will be valued at three years' purchase of average profit of last five years. Profits for the last five years were:
| Year Ended | 31st March, 2015 | 31st March, 2016 | 31st March, 2017 | 31st March, 2018 | 31st March, 2019 |
| Profits (₹) | 90,000 (Loss) |
1,60,000 | 1,50,000 | 65,000 | 1,77,000 |
Books of Account of the firm revealed that:
(i) The firm had gain (profit) of ₹ 50,000 from sale of machinery sold in the year ended 31st March, 2016. The gain (profit) was credited in Profit and Loss Account.
(ii) There was an abnormal loss of ₹ 20,000 incurred in the year ended 31st March, 2017 because of a machine becoming obsolete in accident.
(iii) Overhauling cost of second hand machinery purchased on 1st July, 2017 amounting to ₹ 1,00,000 was debited to Repairs Account. Depreciation is charged @ 20% p.a. on Written Down Value Method.
Calculate the value of goodwill.
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.
Varuna and Karuna are partners for equal shares. They admit Lata into partnership for 1/4th share. It was agreed to value goodwill of the firm at 4 years' purchase of super profit. Normal rate of return is 15% of the capital employed. Average profit of the firm is ₹ 4,00,000. Balance Sheet of the firm as at 31st March, 2019 was as follows:
| Liabilities |
Amount (₹) |
Assets | Amount (₹) |
|
| Capital A/cs: | Furniture | 4,00,000 | ||
| Varuna | 5,00,000 | Computers | 3,00,000 | |
| Karuna | 5,00,000 | 10,00,000 | Electrical Fittings | 1,00,000 |
| Long-term Loan | 5,50,000 | Investments (Trade) | 2,00,000 | |
| Sundry Creditors | 2,00,000 | Stock | 3,00,000 | |
| Outstanding Expenses | 50,000 | Sundry Debtors | 3,00,000 | |
| Advances from Customers | 1,50,000 | Bills Receivable | 50,000 | |
| Cash in Hand | 50,000 | |||
| Cash at Bank | 2,00,000 | |||
| Deferred Revenue Expenditure: | ||||
| Advertisement Suspense | 50,000 | |||
| 19,50,000 | 19,50,000 | |||
Calculate the value of goodwill.
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.
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.
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.
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?
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.
Identify the incorrect pair
The total capitalised value of a business is ₹ 1,00,000; assets are ₹ 1,50,000 and liabilities are ₹ 80,000. The value of goodwill as per the capitalisation method will be ___________.
The following are the profits of a firm in the last five years:
2014: ₹ 10,000; 2015: ₹ 11,000; 2016: ₹ 12,000; 2017: ₹ 13,000 and 2018: ₹ 14,000
Calculate the value of goodwill at 2 years purchase of average profit of five years.
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.
How is goodwill calculated under the super profits method?
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?
