Pls Explain the ans

Pls Explain the ans Amit and Kartik are partners sharing profits and losses equally. They decided to admit Saurabh for an equal share in the profits. For this purpose the goodwill of the firm was to be valued at four years' purchase of super profits. The Balance Sheet of the firm on Saurabh's admission was as follows : Liabilities Capitals : Amit 90,000 Kartik 50.000 Sundry Creditors Amount(O 20,000 25,000 5,000 Assets Machinery Furniture Stock Sundry Debtors Cash Amount (R) 75,000 15,000 30,000 20,000 50,000 The normal rate of retum is 12% per annum. Average profit of the firm for the last four years was 30,000. Calc7ate Saurabh' s share of goodwill.

Dear Student

This is the simple question of calculating goodwill, 
We have to calculate the goodwill of the firm firstly by the simple formula of Super profit which is shown below.
Then as per details of the question, We have to multiply the goodwill with PSR of Saurabh to get his share of goodwill.

Please follow the below table step by step and in case of any query please get back to us.

 
Calculation of Goodwill on the basis of Capitalisation of Super Profit method
Total Assets                  190,000
Less: Liabilities (Loan + Creditors)                    30,000
Capital Employed                  160,000
Normal Profit = Capital employed x normal rate of return    (1,60,000 x 12%)                 19,200
Averge Profit                     30,000
Super Profit = Average Profit - Normal Profit                    10,800
Goodwill @ 4 years purchase of Super Profit    (10,800 x 4)                 43,200
Saurabh's share of goodwill     (43,200 x 1/3)                 14,400


Regards

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