Ans. Goodwill :<
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92. (Calculation of Super Profits and Average Profits when Goodwill and Total Assets are
given) Ludhiana Garments has total assets (excluding goodwill) of 1,87,500, iarding cash of
* 12,500. The Capital account of partners X and Y showed a balance of 1,20,000 and the balance was reserve . Normal rate of return was10%and the goodwill was valued at 60000 at four years purchase of super profit.find out average profit of the firm
Answers
Answer:
200000
Explanation:
(i) 3 Years' purchase of Average Profit method:
Step 1: Calculation of Average Profit:
Average Profit=[(200000-100000)+(180000-100000)+(160000-100000)]/3
= 80000
Step 2: Calculation of Goodwill:
Goodwill= 80000 * 3
= 240000
(ii) 3 Years' purchase of Super Profit method:
Step 1: Calculation of Capital Employed:
Capital Employed= total assets- external liabilities
= 700000-100000
= 600000
Step 2: Calculation of Normal Profit:
Normal Profit= 600000* [10/100]
= 60000
Step 3: Calculation of Average Profit:
Average Profit=[(200000-100000)+(180000-100000)+(160000-100000)]/3
= 80000
Step 4: Calculation of Super Profit:
Super Profit= 80000-60000
= 20000
Step 5: Calculation of goodwill:
Goodwill= 20000 * 3
= 60000
(iii) Capitalisation of Super Profit Method:
Step 1: Calculation of Capital Employed:
Capital Employed= total assets- external liabilities
= 700000-100000
= 600000
Step 2: Calculation of Normal Profit:
Normal Profit= 600000* [10/100]
= 60000
Step 3: Calculation of Average Profit:
Average Profit=[(200000-100000)+(180000-100000)+(160000-100000)]/3
= 80000
Step 4: Calculation of Super Profit:
Super Profit= 80000-60000
= 20000
Step 5: Calculation of goodwill:
Goodwill= Super Profit * [100/Normal Rate of return]
= 20000*[100/10]
= 200000
(iv) Capitalisation of Average Profit method:
Step 1: Calculation of Average Profit:
Average Profit=[(200000-100000)+(180000-100000)+(160000-100000)]/3
= 80000
Step 2: Calculation of capitalised value of profit:
Capitalised value of profit= 80000*[100/10]
= 800000
Step 3: Calculation of Capital Employed:
Capital Employed= total assets- external liabilities
= 700000-100000
= 600000
Step 4: Calculation of goodwill:
Goodwill= 800000-600000
= 200000