Amit and Kartik are partners sharing profits and losses equally. They decided to
admit Saurabh for an equal share in the profits. For this purpose the goodwill of the
firm was to be valued at four years' purchase of super profits.
The Balance Sheet of the firm on Saurabh's admission was as follows:
Liabilities
Amount
90,000
50,000
Capitals :
Amit
Kartik
Reserve
Loan
Sundry Creditors
Amount
Assets
₹
Machinery
Furniture
1,40,000 Stock
20,000 Sundry Debtors
25,000 Cash
₹
75,000
15,000
30,000
20,000
50,000
ch5,000
1,90,000
1,90,000
four
The normal rate of return is 12% per annum. Average profits of the firm for the last
years was 30,000. Calculate Saurabh's share of goodwill.
(C.B.S.E. 2018, Comptt.)
Answers
Saurabh's share of goodwill is Rs. 14,400
Explanation:
Calculation of Goodwill on the basis of Capitalization of Super Profit method:
Capital Employed = Total Assets - Liabilities (Loan + Creditors)
= 190,000 - (25,000 + 5,000)
= Rs. 1,60,000
Normal Profit [ Average Capital Employed × Normal Rate of Return /100]
= 1,60,000 x 12%
= 19,200
Average Profit = 30,000 (given)
Super Profit = Average Profit - Normal Profit
= 30,000 - 19,200
= Rs. 10,800
Goodwill @ 4 years purchase of Super Profit (10,800 x 4) = Rs. 43,200
Saurabh's share of goodwill (43,200 x 1/3) = Rs. 14,400
Explanation:
Amit and Kartik are partners sharing profits and losses equally. They decided to
admit Saurabh for an equal share in the profits. For this purpose the goodwill of the
firm was to be valued at four years' purchase of super profits.
The Balance Sheet of the firm on Saurabh's admission was as follows:
Liabilities
Amount
90,000
50,000
Capitals :
Amit
Kartik
Reserve
Loan
Sundry Creditors
Amount
Assets
₹
Machinery
Furniture
1,40,000 Stock
20,000 Sundry Debtors
25,000 Cash
₹
75,000
15,000
30,000
20,000
50,000
ch5,000
1,90,000
1,90,000
four
The normal rate of return is 12% per annum. Average profits of the firm for the last
years was 30,000. Calculate Saurabh's share of goodwill.
(C.B.S.E. 2018, Comptt.)
