7. A partnership firm earned net profits during the last five years as follows:idents
1st Year—240,000; 2nd Year—50,000; 3rd Year255,000; 4th Year 70,000;5th Year-185,000
The capital investment of the firm is 5,00,000. A fair return on the capital having regard to the
risk involved is 10%. Calculate the value of goodwill on the basis of 3 years purchase of average
super profits earned during the above mentioned period.
(N.C.E.R.T.)
[Ans. Goodwill * 30,000.)
Answers
Answer:
Goodwill of the firm = Rs. 3,30,000
Explanation:
Given:
Profit of firm :
The Profit for the last five years of a firm :
Year ———— Profit (Rs.)
1st Year ———2,40,000
2nd Year ——— 50,000
3rd Year ———2,55,000
4th Year ———— 70,000
5th Year ——— 1,85,000
To find :
Calculate Goodwill of the firm
Solution :
Goodwill = Super Profit × number of year purchased
★ Average Profit =
Average Profit = 1,60,000
Normal Profit = Capital Employed × Rate of return / 100
Normal Profit = 5,00,000 × 10 / 100
Normal Profit = 50,000
Super Profit = Average profit - Normal Profit
Super Profit = 1,60,000 - 50,000
Super Profit = 1,10,000
Goodwill = Super Profit × Number of year purchased
Goodwill = 1,10,000 × 3
Goodwill = 3,30,000
∴ Goodwill of the firm = Rs. 3,30,000
Explanation:
Goodwill of the firm = Rs. 3,30,000
Explanation:
Given:
Profit of firm :
The Profit for the last five years of a firm :
Year ———— Profit (Rs.)
1st Year ———2,40,000
2nd Year ——— 50,000
3rd Year ———2,55,000
4th Year ———— 70,000
5th Year ——— 1,85,000
To find :
Calculate Goodwill of the firm
Solution :
Goodwill = Super Profit × number of year no purchased
★ Average Profit =
\sf{\longrightarrow{\dfrac{Total \: Profits \: for \: past \: Given \: years}{Number \: of \: years}}}⟶
Numberofyears
TotalProfitsforpastGivenyears
\sf{\longrightarrow{\dfrac{2,40,000 \: + \:50,000 \: + \: 2,55,000 \: + \:70,000\: +\:1,85,000}{5}}}⟶
5
2,40,000+50,000+2,55,000+70,000+1,85,000
Average Profit = 1,60,000
Normal Profit = Capital Employed × Rate of return / 100
Normal Profit = 5,00,000 × 10 / 100
Normal Profit = 50,000
Super Profit = Average profit - Normal Profit
Super Profit = 1,60,000 - 50,000
Super Profit = 1,10,000
Goodwill = Super Profit × Number of year purchased
Goodwill = 1,10,000 × 3
Goodwill = 3,30,000
∴ Goodwill of the firm = Rs. 3,30,000