ye Profit Mathod | Goodwill is to be valued at three years’ purchase of four years’ average profit. Profits of the firm for last | four years ending 31st March, were: 4920 12,000; 2021—€ 18,000; 2022 16,000; 2023 14/000. ‘ulate amount of Goodwill, tans Goodwil¥ 45,0001 Profits for the five years ending 31st March, are as follows: Year 2019—Z 4,00,000; Year 2020-—Z 3,98,000; Year 2021—% 4,50,000; Year 2022—% 4,45,000 and ear 2023—X 5,00,000. “Glculate goodwill of the firm on the basis of 4 years’ purchase of 5 years’ average profit. (NCERT, Modified) : {Ans.: Goodwill 17,5440.) by and Chetan are partners in a firm sharing profits and losses equally. They take Beep into April, 2023 for 1/5th share inthe future profits Fo this purpose, goodwill is valued ge annual profit of the previous three or four years, whichever Is higher. ‘Annu, Bal ‘partnership from 1st at 100% of the avera “The annual profits for the purpose of goodwill for the past four years were: : Year Ended Profit (®) 31st March, 2023 -2,88,000; | f 31st March, 2022 j 1,81,800; i ae 31st March, 2021 | 187,200 31st March, 2020 2,53,200. {Ans.: Goodwill 227,550.) culate the value of goodwill. W and Purvi are partners in a firm Partnership for 1/4th share on 1st April, 2023. @ average annual profit of the previous four of Il purpose of the past five years ended 31st ‘March, are: Se oe a 2019 2020 2021 Serre sharing profits and losses in the ratio of 2: 1. They admit Parv into For this purpose, goodwill Is to be valued at four times five years, whichever is higher. The agreed profits for [Ans.: Goodwill—% 56,500.) Lge2.28 Double Entry Book Keeping—CBSE XII Average Profit Method when Past Adjustments are Made 5. Asin and Shreyas were partners sharing profits and losses in the ratio of 2: 1. They admit partner for 1/Sth share in profits Fo this purpose Goodwill ofthe firm was to be valued on the years’ purchase of last five years’ average profit. Profits for the last five years ended 31st Ma Year ie 2019 2020 ai | ae Profts@) | 1.25000 100000 47500 | (62500) | 43 Calculate Goodwill of the firm after adjusting the followin Profit of 2019-20 was calculated after charging % 25,000 for abnormal loss og oe by fi s.: Goodwil Ri Madhu and Vidhi are‘partners sharing profits in the ratio of 3 : 2. They decided to adi “partner from 1st April, 2023 on the following terms: 4 () Manu will be given 2/Sth share of the profit. (i) Goodwill ofthe firm will be valued at two years’ purchase of three yéars’ normal average prof, Profits of the previous three years ended 31st March, were: i 2023—Profit % 30,000 (after debiting loss of stock by fire € 40,000). be 2022—Loss % 80,000 (includes voluntary retirement compensation paid € 1,10,000). - 2021—Profit& 1,10,000 (including a gain (profit) of € 30,000 on the sale of fixed assets), Calculate the value of goodwill. TAns.: & Tarang purchased Jyoti's business with effect from 1st April, 2073. Profits shown by Jyoti’ the last three financial years ended 31st March, were: 2021 + © 1,00,000 {including an abnormal gain of & 12,500). 2022: ©1,25,000 (after charging an, anormal loss of € 25,000). 2023: %1,12,500 (excluding 12,500 as insurance premium on firm's property—now tobe Calculate the value of firm's goodwill on the basis of two years’ purchase of the average profi three years. (Ans.: Goodwill, Abisay, Babu and Charu are partners sharing profits and losses equally. They agree to admit equal share of profi. For this purpose, the value of goodwill s to be calculated on the basis purchase of average profit of las five years. These profits for the year ended 31st March, ° Year 2019 2020 2021 202 | Profits/.oss @) | 150000 | 350,000 500,000 rapa | / On ist April, 2022, a car for & 1,00,000 was purchased and debited to Travelling Experises which depreciation is to be charged @ 25% pa Interest of € 10,000 on Non-trade Inve: to Income for the year ended 31st March, 2022 and 2023, Galeulate the value of goodwill after adjusting the above. Bhaskar and Pillai are partners sharing profits and losses in the ratio of 3 : 2. They adi partnership for 1/4th share in profit. Kanika brings her share of goodwill in cash. Goodwill is to be calculated at two years’ purchase of the average normal profit of past three ast three years ended 31st March, were: 2021—Profit € 50,000 (including profit on sale of assets € 5,000). . 2022—Loss & 20,000 (including loss by fire % 30,000). 2022: -Profit € 70,000 (including insurance claim received % 18, interest Dividend received % 8,000). 2 eee 3 culate the value of goodwill. Also, calculate goodwill brought by Kanika, lAns.: Goodwill—X 66,000; Kanika shall bring 1/4th of & 66,000, Le.er Profit Method the capital of the firm of Anuj and Benu is % 10,00,000 and the market rate of interest is 15%. Annual salary to the partners is % 60,000 each. The profit for the last three years were = 3,00,000, ~ 3,60,000 and % 4,20,000. Goodwill of the firm is to be valued on the basis of two years’ purchase of last three years average super profit. Calculate the goodwill of the firm. (CBSE 2019) [Ans.: Goodwill—z 1,80,000.] ‘Atul and Bipul had a firm in which they had invested ¥ 50,000. On an average, the profits were Z 16,000. The normal rate of return in the industry is 15%, Goodwill is to be valued at four years’ purchase of profits in excess of profits @15% on the money invested. eno the value of goodwill. : [Ans.: Goodwill—& 34,000.) Total capital of the firm of Sakshi, Mehak and Megha is ¥ 1,00,000 ard the market rate of interest Is 15%. The net profits for the last 3 years were % 30,000; < 36,000 and Z 42,000. Goodwill is to be valued at 2 years’ purchase of pe last 3 years’ super profit. Calculate the goodwill of the firm. 4 ‘(Delhi 2017 [Ans.: Goodwill 42,000.) ' \ \2.30 Double Entry Book Keeping—CBSE XII 16. A business earned an average profit of % 8,00,000 during the last few years. The normal rate of in the similar type of business is 10%. The total value of assets and liabilities of the business % 22,00,000 and & 5,60,000 respectively. Calculate the value of goodwill of the firm by super profit me if it is valued at 24 years’ purchase of super profit. (Delhi a [Ans.: Net Assets = % 22,00,000 - 5,60,000=% 16,40,000; Normal Profit 154 Super Profit 6,36,000; Goodwill 15,994 17. Average net profit expected in future by XYZ firm is € 36,000 per year. Average capital employed business by the firm is € 2,00,000. The normal rate of return from capital invested in this class of b is 10%. Remuneration of the partners is estimated to be % 6,000 pa Calculate the value of good the basis of two years’ purchase of super profit. [Ans.: Goodwill— 299 18. A partnership firm earned net profits during the last three years ended 31st March, as follows: 2021—Z 17,000; 2022—% 20,000; 2023—% 23,000. Capital investment in the firm throughout the above-mentioned period has been @ 80,000. regard to the risk involved, 15% is considered to be a fair return on the capital. Calculate value of g on the basis of two years’ purchase of average super profit eamed during the above-mentioned three yed 19. On 1st April, 2023, an existing firm had amounted to & 5,000 on that date. The 2 24,000 at four years’ purchase of supet 20. Average profit of a firm during the last fe business is 10%. If the goodwill of the | capital employed by the firm.