Annu, Baby, and Chetan are partners in a firm sharing profits and losses equally. They take Deep into partnership from 1st April 2023 for 1/5th share in the future profits.
Solution:-
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Profits for the five years ending 31st March are as follows: Year 2019 – ₹ 4,00,000; Year 2020 – ₹ 3,98,000; Year 2021 – ₹ 4,50,000; Year 2022 – ₹ 4,45,000 and Year 2023 – ₹ 5,00,000. Calculate the goodwill of the firm on the basis of 4 Years’ purchase of 5 years’ average profit.
Solution:-
Goodwill is to be valued at three years’ purchase of four years’ average profit. Profits of the firm for the last four years ending 31st March were: 2020 – ₹ 12,000, 2021 – ₹ 18,000; 2022 – ₹ 16,000; 2023 – ₹ 14,000. Calculate the amount of Goodwill
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Arrange the following steps involved for the Valuation of Goodwill by Average Profit Method:
Ans – d) Explanation:- First Correct normal profit is calculated after adjusting abnormalities Total profits is calculated The average Profit is calculated Goodwill is calculated
Total of Assets side of the Balance Sheet – ₹ 25,00,000, Debit Balances in Current Account of Naresh and Vikesh – ₹ 75,000 and ₹ 25,000 respectively; Bank Loan ₹ 8,00,000; Goodwill ₹ 1,00,000; Trade Investments – ₹ 25,000; Profit and Loss Accounts (Debit) – ₹ 15,000.
Ans – d) Explanation:- Capital Employed = Total Assets – Goodwill – Profit and Loss Account (Dr) Balance – Bank Loan – Debit balances of partner’s Current Account Capital Employed = ₹ 25,00,000 – ₹ 1,00,000 – ₹ 15,000 –…
Capital Accounts of Partners Naresh and Vikesh – ₹ 5,00,000 each; Balances in Current Accounts of Naresh and Vikesh – ₹ 50,000 and ₹ 40,000 respectively; Bank Loan – ₹ 10,00,000; Goodwill ₹ 50,000; Investments – ₹ 25,000; Advertisement Suspense – ₹ 15,000. Based on the above information, Capital Employed for the purposes of the valuation of Goodwill will be
Ans – c) Explanation:- Capital Employed = Partner’s Capital + Partner’s Current account Balances – Goodwill – Investments – Advertisement Suspense Capital Employed = 5,00,000 + 5,00,000 + 50,000 + 40,000 – 50,000 – 25,000 – 15,000 Capital Employed =…
Ram and Prem are partners in a retail business. Balances in Capital and Current Accounts as on 31st March 2022 were:
Ans – a) Explanation:- Capital Employed = Ram’s Capital + Ram’s Current A/c + Prem’s Capital A/c – Prem’s Current A/c (Dr.) Capital Employed = 2,00,000 + 50,000 + 2,40,000 – 10,000 Capital Employed = ₹ 4,80,000 Capitalised Value of…
The average Profit of the firm is ₹ 6,00,000. Total tangible Assets in the firm are ₹ 28,00,000 and Outside Liabilities are ₹ 8,00,000. In the same type of business, the normal rate of return is 20% of the capital employed. Calculate the value of goodwill by Capitalisation of the Super Profit Method.
Ans – a) Explanation:- Capital Employed = Tangible Assets – Outside Liabilities Capital Employed = 28,00,000 – 8,00,000 Capital Employed = ₹ 20,00,000 Normal Profit = Capital Employed × Normal Rate of Return Normal Profit = 20,00,000 × 20% Normal…
Tangible Assets of the firm are ₹ 1,40,000 and outside liabilities are ₹ 4,00,000. Profit of the firm is ₹ 1,50,000 and normal rate of return is 10%. The amount of capital employed will be
Ans – a) Explanation:- Capital Employed = Tangible Assets – Outside Liabilities Capital Employed = ₹ 14,00,000 – ₹ 4,00,000 Capital Employed = ₹ 10,00,000
Jagat and Kamal are partners in a firm. Their Capitals are Jagat ₹ 3,00,000 and Kamal ₹ 2,00,000. During the year ended 31st March 2023, the firm earned a profit of ₹ 1,50,000. The normal rate of return is 20%. Calculate the value of the Goodwill of the Firm by Capitalisation Method.
Ans – d) Explanation:- Capital Employed = Jagat’s Capital + Kamal’s Capital Capital Employed = ₹ 3,00,000 + ₹ 2,00,000 Capital Employed = ₹ 5,00,000 Capitalised Value of Average Profit = Average Profit/Normal Rate of Return Capitalised Value of Average…