Question

Capital of the firm of Sharma and Verma is ₹2,00,000 and the market rate of interest is 15%.

Annual salary to partners is ₹12,000 each. The profits for the last three years were ₹ 60,000;

₹72,000 and ₹84,000. Goodwill is to be valued at 2 years’ purchase of last 3 year’s average super

profit.

Calculate goodwill of the firm.

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Answer 1

Answer:

• Number of years purchase = 2 years
• Super profit=18000
• Goodwill=super profit×no.of years purchase
• =18000×2
• =36000

Answer 2

$Net \: Profit \: of \: last \: 3 \: years$

$1 \: st \: year = 60,000 - 24,000 \\ = 36,000$

$2nd \: year = 72,000-24,000 \\ =48,000$

$3rd \: year = 84,000-24,000 \\ =60,000$

$Annual \: Salary \: of \: Rs 12,000 \\ to \: each \: partner$

$Average \: Profit = \frac{Total N.P }{No. \: of \: years}$

$A. \: P = \frac{36,000 + 48,000 + 60,000}{3}$

$Average \: Profit = \frac{1,44,000}{3}$

$Average \: Profit = 48,000$

$Normal \: Profit = \\ capital \: employed \times interest$

$Normal \: Profit = 2,00,000* 15 \\ = 30,000$

Super Profit =

Average Profit- Normal Profit

$Super \: Profit =48,000-30,000 \\ = 18,000$

$Goodwill \\ = S.P× no. year \: purchase$

$Goodwill = 18,000 \times 2$

$Goodwill = 36,000$