TS Grewal Solution Class 12 Chapter 2 Goodwill: Nature and Valuation
Question 1:
Goodwill is to be valued at three years' purchase of four years' average profit. Profits for last four years ending on 31st March of the firm were:
2015–Rs 12,000; 2016–Rs 18,000; 2017–Rs 16,000; 2018–Rs 14,000.
Calculate amount of Goodwill.
Answer 1:
Goodwill under Average Profit method = Average profit per year × Years Purchase
Point of Knowledge:-
♦ Average Profit Method can be calculated by two methods:-
1.) Simple Average Profit Method
2.) Weighted Average Profit Method
Question 2:
The profit for the five years ending on 31st March, are as follows:
Year 2014–Rs 4,00,000 Year 2015–Rs 3,98,000; Year 2016–Rs 4,50,000; Year 2017–Rs 4,45,000; Year 2018–Rs 5,00,000.
Calculate goodwill of the firm on the basis of 4 years' purchase of 5 years' average profit.
Answer 2:
Goodwill under Average Profit method = Average profit per year × Years Purchase
Point of Knowledge:-
♦ Steps to calculated Goodwill by Average profit Method:-
Step 2:- Calculate Goodwill by the formula
= Average Profit × Number of year Purchase (which is given in question)
Question 3:
Calculate value of goodwill on the basis of three years' purchase of average profit of the preceding five years which were as follows:
Answer 3:
Goodwill under Average Profit method = Average profit per year × Years Purchase
Question 4:
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 Rs 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.
Answer 4:
Goodwill under Average Profit method = Average profit per year × Years Purchase
Question 5:
A and B are partners sharing profits in the ratio of 3:2. They decided to admit C as a partner from 1st April, 2018 on the following terms:
(i) C will be given 2/5th share of the profit.
(ii) Goodwill of the firm is valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
2018 – Profit Rs 30,000 ( after debiting loss of stock by fire Rs 40,000).
2017 – Loss Rs 80,000 (includes voluntary retirement compensation paid Rs 1,10,000).
2016 – Profit Rs 1,10,000 (including a gain (profit) of Rs 30,000 on the sale of fixed assets)
you are required to value the goodwill.
Answer 5:
Question 6:
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z into partnership for 1/4th share in goodwill. Z brings in his share of goodwill in cash. Goodwill for this purpose is to be calculated at two years' purchase of the average normal profit of past three years. Profits of the last three years ended 31st March, were:
2016 – Profit Rs 50,000 (including profit on sale of assets Rs5,000).
2017 – Loss Rs 20,000 (includes loss by fire Rs 30,000)
2018 – Profit Rs 70,000 (including insurance claim received Rs 18,000 and interest on investments and Dividend received Rs 8,000).
Calculate value of goodwill. Also, calculate goodwill brought in by Z.
Answer 6:
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