Question

Peter and Paul are partners of a partnership firm, they decide to admit Johnson into partnership from 1st April 2019. For the purpose of admission they decide to value the goodwill.

Calculate the goodwill of a firm using i) Average profit method ii) Weighted average method iii) Super profit method iv) Annuity method v) Capitalisation of super profit method and Capitalisation of average profit method

The Profits for these five years were :

Year ended 31st

March,

2015 31st

March,

2016 31st

March,

2017 31st

March,

2018 31st

March,

2019

Profits (Rs.) 36,000 1,70,000 1,90,000 2,00,000 3,50,000

Scrutiny of books of accounts revealed the following :

(i) An abnormal loss of Rs.50,000 was incurred during the year ended 31st March, 2015.

(ii) An abnormal gain of Rs.30,000 was earned during the year ended 31st March, 2016.

(iii) Repairs to Car amounting to Rs.40,000 was wrongly debited to Vehicles A/c on 1st January, 2018. Depreciation was charged on Vehicles @ 10% p.a. on Straight Line Method.

(iv) Closing Stock as on 31st March 2018 was undervalued by Rs.50,000.

(v) Total assets as on 31st March 2019 amounted to Rs. 20,00,000 and outside liabilities were Rs. 5,00,000.

(vi) An ordinary business in the same industry earns a return of 10% (Also use the same rate for discounting)

(vii) Number of years of purchase to be taken as 4.​

Answer 1

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Answer 2

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