Question

At the time of reconstitution of partnership firm of Juhi and Shalini, goodwill of the firm was valued at ₹ 2,60,000 calculated on the basis of Capitalisation of Super Profit Method.

Firm’s Balance Sheet at the time of reconstitution was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capital Accounts :			Furniture	1,80,000
Juhi	2,00,000		Computers	70,000
Shalini	1,20,000	3,20,000	Closing Stock	1,25,000
Reserves		30,000	Sundry Debtors	85,000
Sundry Creditors		75,000	Cash in Hand	10,000
Bank Overdraft		45,000
		4,70,000		4,70,000

You are required to find out Average Profit of the firm, if normal rate of return is 10%.

Answer 1

\[\text{Goodwill} = \text{Super Profit} \times \frac{100}{\text{Normal Rate of Return}}\]

$$₹2,60,000 = \text{Super Profit} \times \frac{100}{10}$$

$$\text{Super Profit} = 2,60,000 \times \frac{10}{100} = ₹26,000$$ 

$$\text{Capital Employed} = \text{Total Assets} - \text{Outside Liabilities}$$

$$= 4,70,000 - 1,20,000 = ₹3,50,000$$

OR

$$\text{Capital Employed} = \text{Capital of Partners} + \text{Reserves}$$

$$= 3,20,000 + 30,000 = ₹3,50,000$$

$$\text{Normal Profit} = \text{Capital Employed} \times \frac{\text{Normal Rate of Return}}{100}$$

$$= 3,50,000 \times \frac{10}{100} = ₹35,000$$

$$\text{Average Profit} = \text{Normal Profit} + \text{Super Profit}$$

$$= ₹35,000 + ₹26,000 = ₹61,000$$