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Goodwill File Assignments

The document provides practice assignments for valuing goodwill in partnership firms using various methods, including average profits and super profits. It includes multiple scenarios with calculations for goodwill based on historical profits, abnormal losses, and partner admissions. The assignments are aimed at enhancing understanding of goodwill valuation in the context of partnership accounting.

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2 views

Goodwill File Assignments

The document provides practice assignments for valuing goodwill in partnership firms using various methods, including average profits and super profits. It includes multiple scenarios with calculations for goodwill based on historical profits, abnormal losses, and partner admissions. The assignments are aimed at enhancing understanding of goodwill valuation in the context of partnership accounting.

Uploaded by

nityam suri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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COMMERCE POINT

(Amritsar‘ s Leading Commerce Institute dealing in subjects :-


ACCOUNTANCY , ECONOMICS , BUSINESS STUDIES)

PARTNERSHIP FIRMS – VALUATION OF GOODWILL


PRACTICE ASSIGNMENT
AVERAGE PROFITS METHOD

1. The total capital of the firm of Saurabh, Mohit and Nikhil was ₹ 1,00,000. The net
profits for the last 3 years were: 2013-14 ₹ 40,000; 2014-15 ₹ 46,000 and 2015-16 ₹
52,000. There was an abnormal loss of ₹ 3,000 in 2014-15. Goodwill of the firm was
to be valued at 2 years purchase of the average profits of last three years. Calculate the
goodwill of the firm. (Goodwill = ₹ 94,000) (CBSE 2017 C)
2. Calculate goodwill of the firm on the basis of 3 years' purchase of the average
profits of the last five years. The profits of the last five years were:
Year Amount (₹)
2013-14 4,00,000
2014-15 5,00,000
2015-16 (60,000)
2016-17 1,50,000
2017-18 2,50,000
Additional Information:
(1) On 1st January, 2016, a fire broke out which resulted into a loss of goods of ₹
3,00,000. A claim of ₹70,000 were received from the insurance company.
(2) During the year ended 31st March, 2017 the firm received an unexpected tax
refund of ₹ 80,000. (Goodwill = ₹ 8,34,000) (CBSE 2019)

3. Hari and Krishan were partners sharing profits and losses in the ratio of 2: 1. They
admitted Shyam as a partner for 1/5th share in the profits. For this purpose, the
Goodwill of the firm was to be valued on the basis of three years' purchase of last five
years average profits. The profits for the last five years were:
Year 2013-14 2014-15 2015-16 2016-17 2017-18
Profit (₹) 50,000 40,000 75,000 (25,000) 50,000
Calculate Goodwill of the firm after adjusting the following:
The profit of 2014-15 was calculated after charging ₹ 10,000 for abnormal loss of
goods by fire. (Goodwill = ₹ 1,20,000)

Instagram --- @commercepointamritsar


Classes By: R.S. Bhullar (9888-676976) : Kunwarpal Singh (7696-755442)
COMMERCE POINT
(Amritsar‘ s Leading Commerce Institute dealing in subjects :-
ACCOUNTANCY , ECONOMICS , BUSINESS STUDIES)

SUPER PROFITS METHOD AND CAPITALISATION

4. A and B are partners in a firm sharing profits in the ratio of 3: 2. They admit C
into the partnership firm for 1/6th share of the future profits. The goodwill of the
firm is valued at ₹ 18,000 on the basis of 3 years' purchase of the average super
profits of the firm. The firm had assets worth ₹ 15 lakhs and liabilities worth ₹ 12
lakhs. The normal earning capacity of such firms is expected to be 10% p.a. Find
(a) Super profits of the firm,
(b) Average profits of the firm and
(c) Total profits earned by the firm during the last 3 years.
(CBSE Delhi 2001 C) (Super profits - ₹ 6,000 ; Average Profits - ₹ 36,000 ;
Total profits - ₹ 108,000)

5. On April 1, 2018, a firm had assets of ₹ 1,00,000 excluding stock of ₹ 20,000.


The current liabilities were ₹10,000 and the balance constituted Partner's Capital
Accounts. If the normal rate of return is 8%, the goodwill of the firm is valued at ₹
60,000 at four years purchase of super profit. Find the actual profits of the firm.
(Sample Paper 2018-19) (Actual Average profits is ₹ 23,800)

6. The capital employed in a firm is ₹ 10,00,000 and the market rate of interest is
15%. Annual salary of the partners is ₹ 80,000. The profits of the last three years
were ₹ 3,00,000; ₹ 4,00,000 and ₹ 5,00,000 respectively. Calculate the value of
goodwill on the basis of two years' purchase of the average super profits of last three
years.
(CBSE 2013 C) ( Goodwill = ₹ 3,40,000)

7. A business has earned average profits of ₹ 2,00,000 during the last few years and
the normal rate of return in similar type of business is 10%. The assets of the
business were ₹ 20,00,000 and its external liabilities ₹ 3,60,000. Find out the value
of goodwill by Capitalisation of Super Profit Method,
(Delhi 2013 C) ( Goodwill = ₹ 3,60,000)

Instagram --- @commercepointamritsar


Classes By: R.S. Bhullar (9888-676976) : Kunwarpal Singh (7696-755442)

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