Question

16. Purchase of Super Profits): Wise, Clever and Dull were trading in partnership sharing
profits and losses 4:3 : 3 respectively. The accounts of the firm are made upto 31st
December, every year.
The partnership deed provided, inter alia, that:
On the death of a partner the goodwill was to be valued at three years' purchase of
average profits of the three years upto date of death after deducting interest @ 8 per cent
on capital employed and a fair remuneration of each partner. The profits are assumed to
be earned evenly throughout the year.
On 30th June, 2015, Wise died and it was agreed to adjust goodwill in the capital
accounts without showing any amount of goodwill in the Balance Sheet.
It was agreed for the purpose of valuation of goodwill that the fair remuneration for
work done by each partner would be 15,000 per annum and that the capital employed
would be * 1,56,000.
Clever and Dull were to continue the partnership, sharing profits and loss equally after
the death of Wise.
Following were the amounts of profits of earlier years before charging interest on
capital employed :
2012 67,200; 2013 * 75,600; 2014 72,000 and 2015 2 62,400.
You are required to compute the value of goodwill and show the adjustment thereof in
the books of the firm.
Ans. R 39,960; Average Profit 70,800; Super Profit 13,320).​

Answer 1

Answer:

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