Double Entry Book Keeping Ts Grewal (2017) Solutions for Class 12 Commerce Accountancy Chapter 2 Goodwill: Concept And Mode Of Valuation are provided here with simple step-by-step explanations. These solutions for Goodwill: Concept And Mode Of Valuation are extremely popular among class 12 Commerce students for Accountancy Goodwill: Concept And Mode Of Valuation Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Double Entry Book Keeping Ts Grewal (2017) Book of class 12 Commerce Accountancy Chapter 2 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Double Entry Book Keeping Ts Grewal (2017) Solutions. All Double Entry Book Keeping Ts Grewal (2017) Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 2.29:

Question 1:

Answer:

Number of years’ purchase = 3

Page No 2.29:

Question 2:

Number of years’ purchase = 3

Answer:

Calculation of average profits for the last three years

Average Profits=Total ProfitsNumber of YearsAverage Profits=2,88,000 + 1,81,800 + 1,87,2003=Rs 2,19,000

Calculation of average profits for the last four years

Average Profits= Total ProfitsNumber of YearsAverage Profits= 2,88,000 + 1,81,800 + 1,87,200 + 2,53,2003=Rs 2,27,550

Average Profits for last four years is higher than the Average Profits for last three years. Thus, Goodwill of the firm is 2,27,550.

Page No 2.29:

Question 3:

Calculation of average profits for the last three years

Average Profits=Total ProfitsNumber of YearsAverage Profits=2,88,000 + 1,81,800 + 1,87,2003=Rs 2,19,000

Calculation of average profits for the last four years

Average Profits= Total ProfitsNumber of YearsAverage Profits= 2,88,000 + 1,81,800 + 1,87,200 + 2,53,2003=Rs 2,27,550

Average Profits for last four years is higher than the Average Profits for last three years. Thus, Goodwill of the firm is 2,27,550.

Answer:

Year

Profit

2013-14

8,00,000

2012-13

15,00,000

2011-12

18,00,000

2010-11

(4,00,000)

2009-10

13,00,000

Total Profit

50,00,000

Average Profits=Total ProfitsNumber of Years'=50,00,0005=Rs 10,00,000

Goodwill = Avg. Profits × No. of Years' Purchase
         = 10,00,000 × 3
        = Rs 30,00,000

Page No 2.29:

Question 4:

Year

Profit

2013-14

8,00,000

2012-13

15,00,000

2011-12

18,00,000

2010-11

(4,00,000)

2009-10

13,00,000

Total Profit

50,00,000

Average Profits=Total ProfitsNumber of Years'=50,00,0005=Rs 10,00,000

Goodwill = Avg. Profits × No. of Years' Purchase
         = 10,00,000 × 3
        = Rs 30,00,000

Answer:

Calculation of Average Profit
2012–13 = 1,00,000 – 12,500 = 87,500

2013–14 = 1,25,000 + 25,000 = 1,50,000

2014–15 = 1,12500 – 12,500 = 1,00,000

Total Profits for last three years = 3,37,500

Average Profits=Total ProfitsNumber of YearsAverage Profits=3,37,5003=1,12,500

Goodwill=Average Profits × Numbers' of Year PurchaseGoodwill=1,12,500×2=2,25,000



Page No 2.30:

Question 5:

Calculation of Average Profit
2012–13 = 1,00,000 – 12,500 = 87,500

2013–14 = 1,25,000 + 25,000 = 1,50,000

2014–15 = 1,12500 – 12,500 = 1,00,000

Total Profits for last three years = 3,37,500

Average Profits=Total ProfitsNumber of YearsAverage Profits=3,37,5003=1,12,500

Goodwill=Average Profits × Numbers' of Year PurchaseGoodwill=1,12,500×2=2,25,000

Answer:

Year
2009–10
2010–11
2011–12
2012–13
2013–14
Profit/Loss      
1,50,000
3,50,000
5,00,000
7,00,000
(6,00,000)
  Add: Wrong Debit
 
 
 
 
1,00,000
  Less: Depreciation
 
 
 
 
(25,000)
Total
1,50,000
3,50,000
5,00,000
7,00,000
(5,25,000)

Average Profits= Total ProfitsNumber of YearsAverage Profits= 1,50,000+ 3,50,000 + 5,00,000+ 7,00,000 + (5,25,000)5 = 11,75,0005=2,35,000

Goodwill = Average Profits × No. of Years' PurchaseGoodwill = 2,35,000 × 4 = Rs 9,40,000

Page No 2.30:

Question 6:

Year
2009–10
2010–11
2011–12
2012–13
2013–14
Profit/Loss      
1,50,000
3,50,000
5,00,000
7,00,000
(6,00,000)
  Add: Wrong Debit
 
 
 
 
1,00,000
  Less: Depreciation
 
 
 
 
(25,000)
Total
1,50,000
3,50,000
5,00,000
7,00,000
(5,25,000)

Average Profits= Total ProfitsNumber of YearsAverage Profits= 1,50,000+ 3,50,000 + 5,00,000+ 7,00,000 + (5,25,000)5 = 11,75,0005=2,35,000

Goodwill = Average Profits × No. of Years' PurchaseGoodwill = 2,35,000 × 4 = Rs 9,40,000

Answer:

Goodwill = Normal Average Profit × Number of years' purchase

Year

Actual Profit

+

Abnormal

Loss

Non-recurring

Abnormal

Gain

Non-recurring

=

Normal Profit

2017

30,000

+

40,000

Nil

=

70,000

2016

(80,000)

+

1,10,000

Nil

=

30,000

2015

1,10,000

+

Nil

30,000

=

80,000

Normal Profit for 3 Years

1,80,000

 

 

Number of years’ purchase is 2

Goodwill = 60,000 × 2 = Rs 1,20,000

Page No 2.30:

Question 7:

Goodwill = Normal Average Profit × Number of years' purchase

Year

Actual Profit

+

Abnormal

Loss

Non-recurring

Abnormal

Gain

Non-recurring

=

Normal Profit

2017

30,000

+

40,000

Nil

=

70,000

2016

(80,000)

+

1,10,000

Nil

=

30,000

2015

1,10,000

+

Nil

30,000

=

80,000

Normal Profit for 3 Years

1,80,000

 

 

Number of years’ purchase is 2

Goodwill = 60,000 × 2 = Rs 1,20,000

Answer:

Year

Actual Profit

+

Abnormal

Loss

Non-recurring

Abnormal

Gain

Non-recurring

=

Normal Profit

2015

50,000

+

Nil

5,000

=

45,000

2016

(20,000)

+

30,000

Nil

=

10,000

2017

70,000

+

Nil

18,000+8,000

=

44,000

Normal Profit for 3 Years

       99,000

 

 

Number of years’ purchase = 2

Page No 2.30:

Question 8:

Year

Actual Profit

+

Abnormal

Loss

Non-recurring

Abnormal

Gain

Non-recurring

=

Normal Profit

2015

50,000

+

Nil

5,000

=

45,000

2016

(20,000)

+

30,000

Nil

=

10,000

2017

70,000

+

Nil

18,000+8,000

=

44,000

Normal Profit for 3 Years

       99,000

 

 

Number of years’ purchase = 2

Answer:

Goodwill=Average Profit×No. of years' purchase               =1,41,250×2=Rs 2,82,500


Working Notes:

WN: 1 Calculation of Normal Profits

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2014

80,000

20,000

1,00,000

31 March, 2015

1,45,000

(25,000)

1,20,000

31 March, 2016

1,60,000

(15,000)

1,45,000

31 March, 2017

2,00,000

  •  

2,00,000

 

5,45,000

 

WN: 2 Calculation of Average Profit

Average Profit=Total Profit for past given years Number of Years                        =5,45,0004=Rs 1,41,250

 



Page No 2.31:

Question 9:

Goodwill=Average Profit×No. of years' purchase               =1,41,250×2=Rs 2,82,500


Working Notes:

WN: 1 Calculation of Normal Profits

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2014

80,000

20,000

1,00,000

31 March, 2015

1,45,000

(25,000)

1,20,000

31 March, 2016

1,60,000

(15,000)

1,45,000

31 March, 2017

2,00,000

  •  

2,00,000

 

5,45,000

 

WN: 2 Calculation of Average Profit

Average Profit=Total Profit for past given years Number of Years                        =5,45,0004=Rs 1,41,250

 

Answer:

Goodwill=Average Profit×No. of years' purchase               =1,00,000×3=Rs 3,00,000


Working Notes:

WN: 1 Calculation of Normal Profits

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

(90,000)

-

(90,000)

31 March, 2014

1,60,000

(50,000)

1,10,000

31 March, 2015

1,50,000

20,000

1,70,000

31 March, 2016

65,000

85,000*

1,50,000

31 March, 2017

1,77,000

(17,000)

1,60,000

 

5,00,000

* Adjustment Amount

Overhauling cost of second hand machinery wrongly accounted as expense instead of capital expenditure. Profit to be increase by Rs 1,00,000                     

1,00,000

Depreciation to be debited from P&L A/c (1,00,000×20100×912)

(15,000)

Amount to be added back

85,000

 

WN: 2 Calculation of Average Profit

Average Profit=Total Profit for past given yearsNumber of Years                        =5,00,0005=Rs 1,00,000

 

Page No 2.31:

Question 10:

Goodwill=Average Profit×No. of years' purchase               =1,00,000×3=Rs 3,00,000


Working Notes:

WN: 1 Calculation of Normal Profits

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

(90,000)

-

(90,000)

31 March, 2014

1,60,000

(50,000)

1,10,000

31 March, 2015

1,50,000

20,000

1,70,000

31 March, 2016

65,000

85,000*

1,50,000

31 March, 2017

1,77,000

(17,000)

1,60,000

 

5,00,000

* Adjustment Amount

Overhauling cost of second hand machinery wrongly accounted as expense instead of capital expenditure. Profit to be increase by Rs 1,00,000                     

1,00,000

Depreciation to be debited from P&L A/c (1,00,000×20100×912)

(15,000)

Amount to be added back

85,000

 

WN: 2 Calculation of Average Profit

Average Profit=Total Profit for past given yearsNumber of Years                        =5,00,0005=Rs 1,00,000

 

Answer:

Year

Profit

×

Weight

=

Product

2013

20,000

×

1

=

20,000

2014

24,000

×

2

=

48,000

2015

30,000

×

3

=

90,000

2016

25,000

×

4

=

1,00,000

2017

18,000

×

5

=

90,000

Total

 

 

15

 

3,48,000

 

 

 

 

 

 

Page No 2.31:

Question 11:

Year

Profit

×

Weight

=

Product

2013

20,000

×

1

=

20,000

2014

24,000

×

2

=

48,000

2015

30,000

×

3

=

90,000

2016

25,000

×

4

=

1,00,000

2017

18,000

×

5

=

90,000

Total

 

 

15

 

3,48,000

 

 

 

 

 

 

Answer:

Year

Profit before Partners’ Remuneration

Partners’ Remuneration

=

Profit after Partners’ Remuneration

2014-15

2,00,000

90,000

=

1,10,000

2015-16

2,30,000

90,000

=

1,40,000

2016-17

2,50,000

90,000

=

1,60,000

 

Year

Profit

×

Weight

=

Product

2014-15

1,10,000

×

1

=

1,10,000

2015-16

1,40,000

×

2

=

2,80,000

2016-17

1,60,000

×

3

=

4,80,000

 

Total

 

6

 

8,70,000

 

 

 

 

 

 

Page No 2.31:

Question 12:

Year

Profit before Partners’ Remuneration

Partners’ Remuneration

=

Profit after Partners’ Remuneration

2014-15

2,00,000

90,000

=

1,10,000

2015-16

2,30,000

90,000

=

1,40,000

2016-17

2,50,000

90,000

=

1,60,000

 

Year

Profit

×

Weight

=

Product

2014-15

1,10,000

×

1

=

1,10,000

2015-16

1,40,000

×

2

=

2,80,000

2016-17

1,60,000

×

3

=

4,80,000

 

Total

 

6

 

8,70,000

 

 

 

 

 

 

Answer:

Goodwill = Weighted Average Profit × No. of years purchase

Year
 Profit before Salary
Salary
Profit after Salary
Weights
Weighted Profit
 
A
B
C = A – B
D
E = C × D
2012
1,40,000
90,000
50,000
1
50,000
2013
1,01,000
90,000
11,000
2
22,000
2014
1,30,000
90,000
40,000
3
1,20,000
 
 
 
Total
6
1,92,000

 Weighted Average Profit=Total Weighted ProfitsTotal Weights=1,92,0006=32,000

Goodwill = Weighted Average Profits × No. of Years' PurchaseGoodwill= 32,000×4=1,28,000

Page No 2.31:

Question 13:

Goodwill = Weighted Average Profit × No. of years purchase

Year
 Profit before Salary
Salary
Profit after Salary
Weights
Weighted Profit
 
A
B
C = A – B
D
E = C × D
2012
1,40,000
90,000
50,000
1
50,000
2013
1,01,000
90,000
11,000
2
22,000
2014
1,30,000
90,000
40,000
3
1,20,000
 
 
 
Total
6
1,92,000

 Weighted Average Profit=Total Weighted ProfitsTotal Weights=1,92,0006=32,000

Goodwill = Weighted Average Profits × No. of Years' PurchaseGoodwill= 32,000×4=1,28,000

Answer:

Calculation of Normal Profit

Year

Particulars

 

Normal

Profit

2005

25,000 - 5000 (Management Cost)

=

20,000

2006

27,000 + 10,000 (Plant Repair) 1,000 (Deprecation) – 1000 (Closing Stock)  - 5000 (Management Cost)

=

30,000

2007

46,900 – 900 (Deprecation) +1,000 (Opening Stock) – 2,000 (Closing Stock) – 5,000 (Management Cost)

=

40,000

2008

53,810 – 810 (Deprecation) + 2,000 (Opening Stock) – 5,000 (Management Cost

=

50,000

Calculation of Weighted Profit

Year

Normal Profit

×

Weight

=

Product

2005

20,000

×

1

=

20,000

2006

30,000

×

2

=

60,000

2007

40,000

×

3

=

1,20,000

2008

50,000

×

4

=

2,00,000

 

Total

 

10

 

4,00,000

 

 

 

 

 

 



Page No 2.32:

Question 14:

Calculation of Normal Profit

Year

Particulars

 

Normal

Profit

2005

25,000 - 5000 (Management Cost)

=

20,000

2006

27,000 + 10,000 (Plant Repair) 1,000 (Deprecation) – 1000 (Closing Stock)  - 5000 (Management Cost)

=

30,000

2007

46,900 – 900 (Deprecation) +1,000 (Opening Stock) – 2,000 (Closing Stock) – 5,000 (Management Cost)

=

40,000

2008

53,810 – 810 (Deprecation) + 2,000 (Opening Stock) – 5,000 (Management Cost

=

50,000

Calculation of Weighted Profit

Year

Normal Profit

×

Weight

=

Product

2005

20,000

×

1

=

20,000

2006

30,000

×

2

=

60,000

2007

40,000

×

3

=

1,20,000

2008

50,000

×

4

=

2,00,000

 

Total

 

10

 

4,00,000

 

 

 

 

 

 

Answer:

Year

Profit

×

Weight

=

Product

2013

45,000

×

1

=

45,000

2014

   15,000

×

2

=

          30,000

2015

44,000

×

3

=

1,32,000

 

Total

 

6

 

2,07,000

           


Weighted Average Profit =Total Product of ProfitsTotalofWeights=2,07,0006=Rs34,500

Goodwill = Weighted Average Profit × Number of Years’ Purchase

               = 34,500 × 2 = Rs 69,000

Goodwill brought in by Z = Total Goodwill × His share of Profit
=69,000 × 14= Rs 17,250

 

Working Note:

Profits for the past years:

Year

Profit

 

Abnormal Profit

Abnormal Loss

=

Profit

2013

50,000

-

5,000

 

=

45,000

2014

   (20,000)

+

 

35,000

=

15,000

2015

70,000

-

26,000*

 

=

44,000

 

Total

 

 

   

2,07,000

*Total Abnormal Gain = 18,000 (Insurance claim received) + 8,000 (Interest & Dividend received) = 26,000

 

Page No 2.32:

Question 15:

Year

Profit

×

Weight

=

Product

2013

45,000

×

1

=

45,000

2014

   15,000

×

2

=

          30,000

2015

44,000

×

3

=

1,32,000

 

Total

 

6

 

2,07,000

           


Weighted Average Profit =Total Product of ProfitsTotalofWeights=2,07,0006=Rs34,500

Goodwill = Weighted Average Profit × Number of Years’ Purchase

               = 34,500 × 2 = Rs 69,000

Goodwill brought in by Z = Total Goodwill × His share of Profit
=69,000 × 14= Rs 17,250

 

Working Note:

Profits for the past years:

Year

Profit

 

Abnormal Profit

Abnormal Loss

=

Profit

2013

50,000

-

5,000

 

=

45,000

2014

   (20,000)

+

 

35,000

=

15,000

2015

70,000

-

26,000*

 

=

44,000

 

Total

 

 

   

2,07,000

*Total Abnormal Gain = 18,000 (Insurance claim received) + 8,000 (Interest & Dividend received) = 26,000

 

Answer:

Goodwill=Weighted Average Profit×No. of years' Purchase               =1,39,000×3=Rs 4,17,000


Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

70,000

20,000

90,000

31 March, 2014

1,40,000

(30,000)

1,10,000

31 March, 2015

1,00,000

-

1,00,000

31 March, 2016

1,60,000

(10,000)

1,50,000

31 March, 2017

1,65,000

10,000

1,75,000

 

WN: 2 Calculations of Weighted Average Profits:

Year

Normal Profit

Weight

Product

31 March, 2013

90,000

1

90,000

31 March, 2014

1,10,000

2

2,20,000

31 March, 2015

1,00,000

3

3,00,000

31 March, 2016

1,50,000

4

6,00,000

31 March, 2017

1,75,000

5

8,75,000

Total

 

15

20,85,000

Weighted Average Profit=Total of Profit ProductTotal of Weights                                       =20,85,00015=Rs 1,39,000

Page No 2.32:

Question 16:

Goodwill=Weighted Average Profit×No. of years' Purchase               =1,39,000×3=Rs 4,17,000


Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

70,000

20,000

90,000

31 March, 2014

1,40,000

(30,000)

1,10,000

31 March, 2015

1,00,000

-

1,00,000

31 March, 2016

1,60,000

(10,000)

1,50,000

31 March, 2017

1,65,000

10,000

1,75,000

 

WN: 2 Calculations of Weighted Average Profits:

Year

Normal Profit

Weight

Product

31 March, 2013

90,000

1

90,000

31 March, 2014

1,10,000

2

2,20,000

31 March, 2015

1,00,000

3

3,00,000

31 March, 2016

1,50,000

4

6,00,000

31 March, 2017

1,75,000

5

8,75,000

Total

 

15

20,85,000

Weighted Average Profit=Total of Profit ProductTotal of Weights                                       =20,85,00015=Rs 1,39,000

Answer:

Goodwill=Weighted Average Profit (Adjusted)×No. of years' Purchase               =1,05,000×3=Rs 3,15,000
 

Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

1,25,000

-

1,25,000

31 March, 2014

1,40,000

-

1,40,000

31 March, 2015

1,20,000

-

1,20,000

31 March, 2016

55,000

1,35,000*

1,50,000

31 March, 2017

2,57,000

(67,000)**

1,90,000

 

 

* Adjustment Amount

(1) Amount spent at the time of purchase of machinery wrongly accounted as expense instead of capital expenditure. Profit to be increase by Rs 1,00,000                     

1,00,000

Depreciation to be debited from P&L A/c (1,00,000×20100×912)

(15,000)

Amount to be added back

85,000

(2) Closing stock being undervalued on 31st March, 2016 means profit is shown at lower profit.

 

** Adjustment Amount

(1) Written down value as on 1st April, 2016 on amount spent                     

85,000

Depreciation to be debited from P&L A/c (85,000×20100)

(17,000)

Amount to be added back

68,000

(2) Closing stock being undervalued on 31st March, 2016 means profit is shown at lower profit. Profit for next year shown at higher amount as closing stock of previous year is carried forward as opening stock of next year.

 

WN: 2 Calculations of Weighted Average Profits:

Year

Normal Profit

Weights

Product

31 March, 2013

1,25,000

1

1,25,000

31 March, 2014

1,40,000

2

2,80,000

31 March, 2015

1,20,000

3

3,60,000

31 March, 2016

1,90,000

4

7,60,000

31 March, 2017

1,90,000

5

9,50,000

Total

 

15

24,75,000

Weighted Average Profit=Total of Profit ProductTotal of Weights                                       =24,75,00015=Rs 1,65,000Weighted Average Profit (Adjusted) = Rs 1,65,000 - 60,000(Remuneration to partners)                                                        = Rs 1,05,000

Page No 2.32:

Question 17:

Goodwill=Weighted Average Profit (Adjusted)×No. of years' Purchase               =1,05,000×3=Rs 3,15,000
 

Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

1,25,000

-

1,25,000

31 March, 2014

1,40,000

-

1,40,000

31 March, 2015

1,20,000

-

1,20,000

31 March, 2016

55,000

1,35,000*

1,50,000

31 March, 2017

2,57,000

(67,000)**

1,90,000

 

 

* Adjustment Amount

(1) Amount spent at the time of purchase of machinery wrongly accounted as expense instead of capital expenditure. Profit to be increase by Rs 1,00,000                     

1,00,000

Depreciation to be debited from P&L A/c (1,00,000×20100×912)

(15,000)

Amount to be added back

85,000

(2) Closing stock being undervalued on 31st March, 2016 means profit is shown at lower profit.

 

** Adjustment Amount

(1) Written down value as on 1st April, 2016 on amount spent                     

85,000

Depreciation to be debited from P&L A/c (85,000×20100)

(17,000)

Amount to be added back

68,000

(2) Closing stock being undervalued on 31st March, 2016 means profit is shown at lower profit. Profit for next year shown at higher amount as closing stock of previous year is carried forward as opening stock of next year.

 

WN: 2 Calculations of Weighted Average Profits:

Year

Normal Profit

Weights

Product

31 March, 2013

1,25,000

1

1,25,000

31 March, 2014

1,40,000

2

2,80,000

31 March, 2015

1,20,000

3

3,60,000

31 March, 2016

1,90,000

4

7,60,000

31 March, 2017

1,90,000

5

9,50,000

Total

 

15

24,75,000

Weighted Average Profit=Total of Profit ProductTotal of Weights                                       =24,75,00015=Rs 1,65,000Weighted Average Profit (Adjusted) = Rs 1,65,000 - 60,000(Remuneration to partners)                                                        = Rs 1,05,000

Answer:

Goodwill=Super Profit×No. of Years' Purchase               =24,000×7=Rs 1,68,000


Working Notes:

 

WN1: Calculation of Future Maintainable Profits


Average Profit=80,000+8,000                        =Rs 88,000Normal Profit=Capital Employed ×Normal Rate of Return100                       =8,00,000×8100=Rs 64,000Super Profit=Average ProfitNormal Profit                    =88,00064,000=Rs 24,000

 



Page No 2.33:

Question 18:

Goodwill=Super Profit×No. of Years' Purchase               =24,000×7=Rs 1,68,000


Working Notes:

 

WN1: Calculation of Future Maintainable Profits


Average Profit=80,000+8,000                        =Rs 88,000Normal Profit=Capital Employed ×Normal Rate of Return100                       =8,00,000×8100=Rs 64,000Super Profit=Average ProfitNormal Profit                    =88,00064,000=Rs 24,000

 

Answer:

Number of years’ purchase = 4

Page No 2.33:

Question 19:

Number of years’ purchase = 4

Answer:

Number of years’ purchase = 3

Page No 2.33:

Question 20:

Number of years’ purchase = 3

Answer:



Number of years’ purchase = 2

Page No 2.33:

Question 21:



Number of years’ purchase = 2

Answer:


 

Number of years’ purchase = 2

Page No 2.33:

Question 22:


 

Number of years’ purchase = 2

Answer:

Year

Profit before Partners’ Remuneration

Partners’ Remuneration

=

Actual Profit after Remuneration

2013–14

1,70,000

1,00,000

=

70,000

2014–15

2,00,000

1,00,000

=

1,00,000

2015–16

2,30,000

1,00,000

=

1,30,000

Number of years’ purchase = 2

Page No 2.33:

Question 23:

Year

Profit before Partners’ Remuneration

Partners’ Remuneration

=

Actual Profit after Remuneration

2013–14

1,70,000

1,00,000

=

70,000

2014–15

2,00,000

1,00,000

=

1,00,000

2015–16

2,30,000

1,00,000

=

1,30,000

Number of years’ purchase = 2

Answer:

Page No 2.33:

Question 24:

Answer:

Number of years’ purchase = 4

Page No 2.33:

Question 25:

Number of years’ purchase = 4

Answer:

Capital Employed = Total Assets Creditors

= 75,000 5,000 = Rs 70,000

Goodwill of the firm = Rs 24,000

Number of years’ purchase = 4

Or, 24,000 = Super Profit × 4

Page No 2.33:

Question 26:

Capital Employed = Total Assets Creditors

= 75,000 5,000 = Rs 70,000

Goodwill of the firm = Rs 24,000

Number of years’ purchase = 4

Or, 24,000 = Super Profit × 4

Answer:

Goodwill=Super Profit×No. of Years' Purchase               =1,08,500×5=Rs 5,42,500

Working Notes
:

 

WN1: Calculation of Future Maintainable Profits

Average Profit=1,00,000+40,000                        = Rs 1,40,000Normal Profit=Capital Employed ×Normal Rate of Return100                       =6,30,000×5100=Rs 31,500Super Profit=Average ProfitNormal Profit                    =1,40,00031,500=Rs 1,08,500

 

Page No 2.33:

Question 27:

Goodwill=Super Profit×No. of Years' Purchase               =1,08,500×5=Rs 5,42,500

Working Notes
:

 

WN1: Calculation of Future Maintainable Profits

Average Profit=1,00,000+40,000                        = Rs 1,40,000Normal Profit=Capital Employed ×Normal Rate of Return100                       =6,30,000×5100=Rs 31,500Super Profit=Average ProfitNormal Profit                    =1,40,00031,500=Rs 1,08,500

 

Answer:

Average Profit earned by a firm = Rs 7,50,000
Overvaluation of Stock = Rs 30,000
Average Actual Profit = Average Profit earned by a firm – Overvaluation of Stock
or, Average Actual Profit = 7,50,000 – 30,000 = Rs 7,20,000



Super Profit = Actual Average Profit – Normal Profit
or, Super Profit = 7,20,000 – 6,30,000 = Rs 90,000
Goodwill = Super Profit × Number of Times
Goodwill = 90,000 × 3 = Rs 2,70,000



Page No 2.34:

Question 28:

Average Profit earned by a firm = Rs 7,50,000
Overvaluation of Stock = Rs 30,000
Average Actual Profit = Average Profit earned by a firm – Overvaluation of Stock
or, Average Actual Profit = 7,50,000 – 30,000 = Rs 7,20,000



Super Profit = Actual Average Profit – Normal Profit
or, Super Profit = 7,20,000 – 6,30,000 = Rs 90,000
Goodwill = Super Profit × Number of Times
Goodwill = 90,000 × 3 = Rs 2,70,000

Answer:

Goodwill=Super Profit×No. of Years' Purchase               =48,000×3=Rs 1,44,000


Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

1,50,000

-

1,50,000

31 March, 2014

1,80,000

-

1,80,000

31 March, 2015

1,00,000

1,00,000

2,00,000

31 March, 2016

2,60,000

(40.000)

2,20,000

31 March, 2017

2,40,000

-

2,40,000

 

 

Total Profit

9,90,000

 

WN2: Calculation of Super Profits

Average Profit=Total Profit of past given yearsNumber of Years                        =9,90,0005=Rs 1,98,000Normal Profit=Capital Employed×Normal Rate of Return100                       =15,00,000×10100=Rs 1,50,000Super Profit=Average Profit-Normal Profit                    =1,98,000-1,50,000=Rs 48,000

WN3: Calculation of Capital Employed

  Capital Employed=Total Assets-Outside Liabilities                              =20,00,000-5,00,000=Rs 15,00,000

Page No 2.34:

Question 29:

Goodwill=Super Profit×No. of Years' Purchase               =48,000×3=Rs 1,44,000


Working Notes:

WN: 1 Calculation of Normal Profits:

Year

Profit/(Loss) (Rs)

Adjustment

Normal Profit (Rs)

31 March, 2013

1,50,000

-

1,50,000

31 March, 2014

1,80,000

-

1,80,000

31 March, 2015

1,00,000

1,00,000

2,00,000

31 March, 2016

2,60,000

(40.000)

2,20,000

31 March, 2017

2,40,000

-

2,40,000

 

 

Total Profit

9,90,000

 

WN2: Calculation of Super Profits

Average Profit=Total Profit of past given yearsNumber of Years                        =9,90,0005=Rs 1,98,000Normal Profit=Capital Employed×Normal Rate of Return100                       =15,00,000×10100=Rs 1,50,000Super Profit=Average Profit-Normal Profit                    =1,98,000-1,50,000=Rs 48,000

WN3: Calculation of Capital Employed

  Capital Employed=Total Assets-Outside Liabilities                              =20,00,000-5,00,000=Rs 15,00,000

Answer:

Total Capital = Rs 16,00,000

Page No 2.34:

Question 30:

Total Capital = Rs 16,00,000

Answer:

Page No 2.34:

Question 31:

Answer:

Capital Employed = Total Tangible Assets – Outside Liabilities

Capital Employed = 28,00,000 – 8,00,000 = Rs 20,00,000

Normal Profit=Capital Employed×Normal Rate of Return 100

Normal Profit=20,00,000×10 100=Rs 2,00,000

Average Profit = Rs 3,00,000

Super Profit= Average Profit– Normal Profit

Super Profit= 3,00,000 – 2,00,000 = 1,00,000

Goodwill=Super Profit×100 Normal Rate of ReturnGoodwill=1,00,000×10010=Rs 10,00,000

Page No 2.34:

Question 32:

Capital Employed = Total Tangible Assets – Outside Liabilities

Capital Employed = 28,00,000 – 8,00,000 = Rs 20,00,000

Normal Profit=Capital Employed×Normal Rate of Return 100

Normal Profit=20,00,000×10 100=Rs 2,00,000

Average Profit = Rs 3,00,000

Super Profit= Average Profit– Normal Profit

Super Profit= 3,00,000 – 2,00,000 = 1,00,000

Goodwill=Super Profit×100 Normal Rate of ReturnGoodwill=1,00,000×10010=Rs 10,00,000

Answer:

Page No 2.34:

Question 33:

Answer:

Goodwill =Super Profit ×100Normal Rate of Return              =67,500 ×10010=Rs 6,75,000
Working Notes
:

 

WN1: Calculation of Future Maintainable Profits


Average Profit=1,25,000           Normal Profit=Capital Employed×Normal Rate of Return100                       =5,75,000 ×10100=Rs 57,500Super Profit=Average ProfitNormal Profit                    =1,25,00057,500=Rs 67,500The Capital Employed will be Rs 5,75,000=2,50,000+3,00,000+50,00025,000

 

Page No 2.34:

Question 34:

Goodwill =Super Profit ×100Normal Rate of Return              =67,500 ×10010=Rs 6,75,000
Working Notes
:

 

WN1: Calculation of Future Maintainable Profits


Average Profit=1,25,000           Normal Profit=Capital Employed×Normal Rate of Return100                       =5,75,000 ×10100=Rs 57,500Super Profit=Average ProfitNormal Profit                    =1,25,00057,500=Rs 67,500The Capital Employed will be Rs 5,75,000=2,50,000+3,00,000+50,00025,000

 

Answer:

Goodwill=Super Profit×100Normal Rate of Return              =80,000×10010=Rs 8,00,000

Working Notes:

WN1: Calculation of Super Profits

Average Profit=Total Profit for past given yearsNumber of Years                        =Rs 2,00,000Normal Profit=Capital Employed×Normal Rate of Return100                       =12,00,000×10100=Rs 1,20,000Super Profit=Average Profit-Normal Profit                    =2,00,000-1,20,000=Rs 80,000


WN2: Calculation of Capital Employed

Capital Employed=Total Assets-Outside Liabilities                              =15,00,000-3,00,000=Rs 12,00,000

 



Page No 2.35:

Question 35:

Goodwill=Super Profit×100Normal Rate of Return              =80,000×10010=Rs 8,00,000

Working Notes:

WN1: Calculation of Super Profits

Average Profit=Total Profit for past given yearsNumber of Years                        =Rs 2,00,000Normal Profit=Capital Employed×Normal Rate of Return100                       =12,00,000×10100=Rs 1,20,000Super Profit=Average Profit-Normal Profit                    =2,00,000-1,20,000=Rs 80,000


WN2: Calculation of Capital Employed

Capital Employed=Total Assets-Outside Liabilities                              =15,00,000-3,00,000=Rs 12,00,000

 

Answer:

(i) Goodwill=Super Profit×No. of Years' Purchase               =20,000×3=Rs 60,000

(ii) Goodwill=Super Profit×100Normal Rate of Return              =20,000×10010=Rs 2,00,000

Working Notes:

WN1: Calculation of Super Profits

Average Profit=Total Profits for past given yearsNo. of Years                        =Rs 50,000Normal Profit=Capital Employed×Normal Rate of Return100                       =3,00,000×10100=Rs 30,000Super Profit=Average Profit-Normal Profit                    =50,000-30,000=Rs 20,000


 

Page No 2.35:

Question 36:

(i) Goodwill=Super Profit×No. of Years' Purchase               =20,000×3=Rs 60,000

(ii) Goodwill=Super Profit×100Normal Rate of Return              =20,000×10010=Rs 2,00,000

Working Notes:

WN1: Calculation of Super Profits

Average Profit=Total Profits for past given yearsNo. of Years                        =Rs 50,000Normal Profit=Capital Employed×Normal Rate of Return100                       =3,00,000×10100=Rs 30,000Super Profit=Average Profit-Normal Profit                    =50,000-30,000=Rs 20,000


 

Answer:

1. Goodwill=Average Profit×No. of years' Purchase               =1,35,000×3=Rs 4,05,000

2. Goodwill=Super Profit×No. of years' Purchase               =22,500×3=Rs 67,500

3. Goodwill=Super Profit×100Normal Rate of Return              =22,500×10015=Rs 1,50,000

 4. Goodwill=Capitalised ValueNet Assets                     = 9,00,0008,25,000=75,000Capitalised Value = 1,35,000×10015=9,00,000Net Assets = 9,00,00075,000=8,25,000

WN1: Calculation of Average and Super Profits

Average Profit=Total ProfitNo. of Years=2,25,0001,87,500+6,37,5003Remuneration to partners                        =Rs 2,25,000  Rs 90,000 (3,750×2×12) Average Profit = Rs 1,35,000Normal Profit=Capital Employed×Normal Rate of Return100                       =7,50,000×15100=Rs 1,12,500Super Profit=Average ProfitNormal Profit                    =1,35,0001,12,500=Rs 22,500

Page No 2.35:

Question 37:

1. Goodwill=Average Profit×No. of years' Purchase               =1,35,000×3=Rs 4,05,000

2. Goodwill=Super Profit×No. of years' Purchase               =22,500×3=Rs 67,500

3. Goodwill=Super Profit×100Normal Rate of Return              =22,500×10015=Rs 1,50,000

 4. Goodwill=Capitalised ValueNet Assets                     = 9,00,0008,25,000=75,000Capitalised Value = 1,35,000×10015=9,00,000Net Assets = 9,00,00075,000=8,25,000

WN1: Calculation of Average and Super Profits

Average Profit=Total ProfitNo. of Years=2,25,0001,87,500+6,37,5003Remuneration to partners                        =Rs 2,25,000  Rs 90,000 (3,750×2×12) Average Profit = Rs 1,35,000Normal Profit=Capital Employed×Normal Rate of Return100                       =7,50,000×15100=Rs 1,12,500Super Profit=Average ProfitNormal Profit                    =1,35,0001,12,500=Rs 22,500

Answer:

Average Profit – Rs 4,00,000
Normal Rate of Return – 10%

(i) Goodwill by Capitalisation of Super profit



Super Profit = Actual Profit – Normal Profit
= 4,00,000 – 3,28,000
= Rs 72,000

Goodwill = Rs 7,20,000

(ii) Super Profit Method if the goodwill is valued at 3 years’ purchase of super profits


Therefore, Goodwill is valued at Rs 2,16,000

Page No 2.35:

Question 38:

Average Profit – Rs 4,00,000
Normal Rate of Return – 10%

(i) Goodwill by Capitalisation of Super profit



Super Profit = Actual Profit – Normal Profit
= 4,00,000 – 3,28,000
= Rs 72,000

Goodwill = Rs 7,20,000

(ii) Super Profit Method if the goodwill is valued at 3 years’ purchase of super profits


Therefore, Goodwill is valued at Rs 2,16,000

Answer:

(i) Calculation of goodwill through Capitalisation Method:
 

Capitalised Value of the Firm=Average Profit ×100 Normal Rate of ReturnCapitalised Value of the Firm=4,50,000 ×100 20=22,50,000
 
Average Capital Employed = 9,00,000 + 6,00,000 = 15,00,000
 
Goodwill = Capitalised Value of the Firm – Average Capital Employed

Goodwill = 22,50,000 – 15,00,00 = Rs 7,50,000

(ii) Calculation of goodwill through Super Profit Method:
 
Normal Profit=Average Capital Employed × Normal Rate of Return 100=15,00,000 × 20 100=3,00,000
 
Average Profit = 4,50,000

Super Profit = Average Profit – Normal Profit

Super Profit = 4,50,000 – 3,00,000 = Rs 1,50,000

Goodwill = Super Profit × No. of Years’ purchase

Good will = 1,50,000 × 2 = 3,00,000

Page No 2.35:

Question 39:

(i) Calculation of goodwill through Capitalisation Method:
 

Capitalised Value of the Firm=Average Profit ×100 Normal Rate of ReturnCapitalised Value of the Firm=4,50,000 ×100 20=22,50,000
 
Average Capital Employed = 9,00,000 + 6,00,000 = 15,00,000
 
Goodwill = Capitalised Value of the Firm – Average Capital Employed

Goodwill = 22,50,000 – 15,00,00 = Rs 7,50,000

(ii) Calculation of goodwill through Super Profit Method:
 
Normal Profit=Average Capital Employed × Normal Rate of Return 100=15,00,000 × 20 100=3,00,000
 
Average Profit = 4,50,000

Super Profit = Average Profit – Normal Profit

Super Profit = 4,50,000 – 3,00,000 = Rs 1,50,000

Goodwill = Super Profit × No. of Years’ purchase

Good will = 1,50,000 × 2 = 3,00,000

Answer:

(i) Calculation of Goodwill by Capitalisation of Super Profit Method

Profit of the firm = Rs 5,00,000

(ii) Calculation of Goodwill by Capitalisation of Average Profit Method 

Page No 2.35:

Question 40:

(i) Calculation of Goodwill by Capitalisation of Super Profit Method

Profit of the firm = Rs 5,00,000

(ii) Calculation of Goodwill by Capitalisation of Average Profit Method 

Answer:

(i)
Goodwill=Average Profits×Number of Years' PurchaseAverage Profits=Sum of Last Years' Profits -Losses (if any)Number of Years                          =7,50,000-6,25,000+21,25,0003=Rs 7,50,000Correct Average Profits=Average Profits-Remuneration                                        =7,50,000-(12,500×12×2)=Rs 4,50,000Goodwill=4,50,000×3=Rs 13,50,000

(ii)
Goodwill=Super Profit×Number of Years' PurchaseSuper Profit=Average Profit-Normal ProfitAverage Profit=Rs 4,50,000Normal Profit=Average Capital Employed×Normal Rate of Return100                      =25,00,000×15100=Rs 3,75,000Super Profit=4,50,000-3,75,000=Rs 75,000Goodwill=75,000×3=Rs 2,25,000

(iii)
Goodwill=Super Profit×100Normal Rate of Return                     =75,000×10015=Rs 5,00,000

(iv)
Goodwill= Capitalised Value of Firm-Net AssetsCapitalised Value of Firm=Average Profit×100Normal Rate of Return                                            =4,50,000×10015=Rs 30,00,000Net Assets=Assets (excluding goodwill)-Liabilities                   =30,00,000-2,50,000=Rs 27,50,000Goodwill=30,00,000-27,50,000=Rs 2,50,000



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