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प्रश्न
Calculate goodwill of a firm on the basis of three years purchases of the Weighted Average Profits of the last four years. The profits of the last four years were:
| Years (ending 31st march) | 2020 | 2021 | 2022 | 2023 |
| Amount | 28,000 | 27,000 | 46,900 | 53,810 |
- On 1st April, 2020 a major plant repair was undertaken for ₹ 10,000 which was charged to revenue. The said sum is to be capitalized for goodwill calculation subject to adjustment of depreciation of 10% on reducing balance method.
- For the purpose of calculating Goodwill the company decided that the years ending 31.03.2020 and 31.03.2021 be weighted as 1 each (being COVID affected) and for year ending 31.03.2022 and 31.03.2023 weights be taken as 2 and 3 respectively.
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उत्तर
| Years (ending 31st March | Adjusted Profit (₹) | Weights | Product (₹) |
| 2020 | 28,000 | 1 | 28,000 |
| 2021 | 36,000 | 1 | 36,000 |
| 2022 | 46,000 | 2 | 92,000 |
| 2023 | 53,000 | 3 | 1,59,000 |
| Total | 7 | 3,15,000 |
| Adjusted Profits | 2020 | 2021 | 2022 | 2023 |
| Given Profits | 28,000 | 27,000 | 46,900 | 53810 |
| Add: Capital Expenditure Charged to Revenue | 10,000 | |||
| Less: Unprovided Depreciation | (1,000) | (900) | (810) | |
| Adjusted Profits | 28,000 | 36,000 | 46,000 | 53,000 |
Weighted Average Profit = `(3,15,000)/7`
= ₹ 45,000
Goodwill = 45,000 × 3 = ₹ 1,35,000
Notes to Solution:
- Depreciation of 2021 = 10% of 10,000
= 10,000 × `10/100` = ₹ 1,000 - Depreciation of 2022 = 10% of 9000
= 9,000 × `10/100` = ₹ 900 - Depreciation of 2022 = 10% of 8,100
= ₹ 8,100
संबंधित प्रश्न
Vivek, Viney and Vijay were partners in a firm sharing profits in the ratio of 2:1:2. The firm closes its books on 31st March every year. On 31-12-2014 Viney died. On that date his capital account showed a debit balance of Rs 10,000 and Goodwill of the firm was valued at Rs 2, 40,000. There was a debit balance of Rs 7,000 in the profit and loss account. Viney's share of profit in the year of his death will be calculated on the basis of average profit of last 5 years which was Rs 90,000.
Pass necessary journal entries in the books of the firm on Viney's death.
Hemant and Nishant were partners in the firm sharing profits in the ratio of 3:2. Their capitals were Rs 1,60,000 and Rs 1,00,000 respectively. They admitted Somesh on 1st April 2013 as a new partner for 1/5 share in the future profits. Somesh brought Rs 1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh's admission.
How does the market situation affect the value of goodwill of a firm?
How does the nature of business affect the value of goodwill of a firm?
State 'True' or 'False'
When goodwill is paid privately, no entry in the books of account is required.
State 'True' or 'False'
The goodwill brought in by the new partner is shared by all partners.
State 'True' or 'False'
The new partner must pay his share of goodwill in cash only.
Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings ₹ 30,000 as capital and ₹ 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at ₹ 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.
M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admit R as a new partner. The new profit-sharing ratio between M, J and R will be 5 : 3 : 2. R brought in ₹ 25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.
Keith, Bina, and Veena were partners in firm sharing profits and losses equally. Their balance sheet as on 31-3-2019 was as follows:
|
Balance Sheet of Keith, Bina, and Veena as on 31-3-2019 |
||||
| Liabilities |
Amount (₹) |
Amount (₹) |
Assets | Amount (₹) |
| Capitals: |
|
3,25,000 |
Plant and Machinery | 2,40,000 |
| Keith | 1,50,000 | Stock | 60,000 | |
| Bina | 1,00,000 | Sundry debtors | 35,000 | |
| Veena |
75,000 |
Cash at bank | 50,000 | |
| General Reserve |
|
30,000 |
||
| Sundry creditors |
|
30,000 |
||
| 3,85,000 | 3,85,000 | |||
Veena died on 30th June 2019. According to the partnership deed, the executors of the deceased partner were entitled to :
- Balance in the capital account
- Salary till the date of death @ ₹ 25,000 per annum.
- Share of goodwill calculated on the basis of twice the average profits of the past three years.
- Share of profit from the closure of the last accounting year till the date of death on the basis of the average of three completed years profits before death.
- Profits for 2016-17, 2017-18 and 2018-19 were ₹ 1,20,000, ₹ 90,000 and ₹ 1,50,000 respectively.
Veena withdrew ₹ 15,000 on 1st June 2019 for paying her daughter’s school fees.
Prepare Veena’s capital account to be rendered to her executors.
Write a word/phrase/term which can substitute the following statement.
Reputation of business measured in terms of money.
Write a word/phrase/term which can substitute the following statement.
Name the method of the treatment of goodwill where new partner will bring his share of goodwill in cash.
State True or False with reason.
When goodwill is paid privately to the partners, it is not recorded in the books.
State True or False with reason.
Cash/ Bank Account is credited when goodwill is withdrawn by the old partners.
Why is a new partner admitted?
Amount brought by a new partner for his share in goodwill is known as _____________.
Old partnership will dissolve if:
Amount of old goodwill already appearing in the books will be written off:
When there is no Goodwill Account in the books and goodwill is raised, ____________ account will be debited.
The amount of goodwill is paid by the new partner:
Which method is followed when the new partner does not bring in his share of goodwill in cash.
What would be the journal entry for revaluation of an increase in the value of a liability?
What would be the journal entry for if goodwill is raised at full value and retained in books?
Goodwill is a/an ______ asset.
Chaman, Raman, and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires. The new profit-sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at ₹1,00,000. Raman's share of goodwill will be adjusted.
Identify the formula for calculating goodwill with the help of capitalised method of super profit.
How is Goodwill of the firm created?
Doremon, Shinchan and Nobita are partners sharing profits and losses in the ratio of 3 : 2 : 1. With effect from 1st April, 2022 they agree to share profits equally. For this purpose, goodwill is to be valued at two year’s purchase of the average profit of the last four years which were as follows:
| Year ending on 31st March, 2019 | ₹ 50,000 (Profit) |
| Year ending on 31st March, 2020 | ₹ 1,20,000 (Profit) |
| Year ending on 31st March, 2021 | ₹ 1,80,000 (Profit) |
| Year ending on 31st March, 2022 | ₹ 70,000 (Loss) |
On 1st April, 2021 a Motor Bike costing ₹ 50,000 was purchased and debited to travelling expenses account, on which depreciation is to be charged @ 20% p.a by Straight Line Method. The firm also paid an annual insurance premium of ₹ 20,000 which had already been charged to Profit and Loss Account for all the years.
Journalise the transaction along with the working notes.
Fill in the blank.
______ = `("Total Profit")/("Number of Years")`
Aayush and Aarushi are partners sharing profits and losses in the ratio of 3 : 2. They admitted Naveen into partnership for 1/4th share. Goodwill of the firm was to be valued at three years' purchase of super profits. Average net profit of the firm was ₹ 20,000. Capital investment in the business was ₹ 50,000 and Normal Rate of Return was 10%. Calculate the amount of Goodwill premium brought by Naveen.
Complete the following Table:
| ? | = | `"Total Profit"/"Number of Years"` |
Find out super profit, if capital employed is ₹ 4,00,000, normal rate of return is 12% and average profit is ₹ 60,000.
______ = Average profit x No. of years of purchase
On 1st April, 2020, Anish started a business with a capital of ₹ 3,00,000.
During the three years ending 31st March, 2023, the results of his business were:
| Year | (₹) | |
| 2020-21 | Loss | 20,000 |
| 2021-22 | Profit | 34,000 |
| 2022-23 | Profit | 46,000 |
From the year 2020-21 to the year 2022-23, Anish withdrew ₹ 30,000 from the firm for his personal use.
On 1st April, 2023, he admitted Danish into partnership on the following terms:
- Goodwill of the firm to be valued at two years’ purchase of the average profits of the last three years.
- Danish to have a `1/4` share in the future profits.
- Danish’s capital is to be equal to `1/4` of Anish’s capital determined on 1st April, 2023, after the goodwill compensation has been taken into account.
You are required to give:
- The formula to calculate goodwill by the Average Profit Method.
- The value of self-generated goodwill of the firm.
- Danish’s capital contribution.
