7o. Abhay, Babu and Charu are partners sharing profits and losses equally. They agree to admit Daman forequal share of profit. For this purpose, the value of goodwill is to be calculated on the basis of four yearspurchase of average profit of last five years. These profits for the year ended 31st March, were:Year20172018201920202021Profit/Loss) )1,50,0003,50,0005,00,0007,10,000(5,90,000)On 1st April, 2020, a car costing 1,00,000 was purchased and debited to Travelling Expenses Accounton which depreciation is to be charged @ 25% p.a. Interest of 10,000 on Non-trade Investments iscredit to Income for the year ended 31st March, 2020 and 2021.Calculate the value of goodwill after adjusting the above.[Ans.: Goodwill-9,40,000.]
Answers
To find:
Calculation of normal profit for the year ended 31st march 2018:
Total profits. 7,10,000
Add: purchase of car. 1,00,000
8,10,000
Less : Depreciation
on car @25%. (25,000)
Less: Income from
Non trade investment. (10,000)
Normal profit. 7,75,000
Calculation of profit for the year ended 31st March 2019:
Normal loss. (5,90,000)
Less : Income from
non trade investment. (10,000)
Loss (6,00,000)
Average profit for the past 5 years:
=1,50,000+ 3,50,000 + 5,00,000 + 7,75,000 - 6,00,000/5
= 11,75,000/5
=2,35,000
Goodwill = average profit of past 5 years × no. of year purchase
=2,35,000× 4
=9,40,000
Solution:
Goodwill = 9,4,000
Answer:
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