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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
State any three circumstances other than (i) admission of a new partner; (ii) retirement of a partner and (iii) death of a partner, when need for valuation of goodwill of a firm may arise.
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.
Kumar, Gupta and Kavita were partners in the firm sharing profits and losses equally. The firm was engaged in the storage and distribution of canned juice and its godowns were located at three different places in the city. Each godown was being managed individually by Kumar, Gupta and Kavita. Because of increase in business activities at the godown managed by Gupta, he had devoted more time. Gupta demanded that his share in the profits of the firm be increased, to which Kumar and Kavita agreed. The new profit sharing ratio was agreed to be 1: 2: 1. For this purpose, the goodwill of the firm was valued at two years purchase of the average profits of last five years. The profits of the last five years were as follows :
| Years |
Profit Rs |
|
| I | 4,00,000 | |
| II | 4,80,000 | |
| II | 7,33,000 | |
| IV | Loss | 33,000 |
| V | 2,20,000 |
You are required to:
1) Calculate the goodwill of the firm
2) Pass necessary Journal Entry for the treatment of goodwill on the change in profit sharing ratio of Kumar, Gupta and Kavita.
Joshi, Pandey and Agarwal were partners in a firm sharing profits in the ratio of 2:2:1. On 31.3.2014, their Balance Sheet was as follows:
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Bills Payable Agarwal's Loan Capitals Joshi 2,10,000 Pandey 2,04,000 |
51,000 36,000 84,000
4,14,000 |
Cash Debtors Bills payable Furniture Machinery Agarwal’s Capital |
24,000 39,000 27,000 81,000 3,75,000 39,000 |
| 5,85,000 | 5,85,000 |
On 31.12.2014, Agarwal died. The partnership deed provided for the following to the executors of the deceased partner:
(a) His share in the goodwill of the firm, calculated on the basis of three year's purchase of the average profits of the last four years. The profits of the last four years were Rs 2,70,000; Rs 3,00,000; Rs 5,40,000 and Rs 8,10,000 respectively.
(b) His share in the profits of the firm till the date of his death, calculated on the basis of the average profits of the last four years.
(c) Interest @12% per annum on the credit balance, if any, in his Capital account.
(d) Interest on his loan @12% per annum.
Prepare Agarwal's Capital Account to be presented to his executors.
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'
On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account.
Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at Rs 1,80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary Journal entries.
X and Y are partners with capitals of ₹ 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings in ₹ 80,000 as his share of capital. The Profit and Loss Account showed a credit balance of ₹ 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.
Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at ₹ 5,50,000. Goodwill existed in the books of account at ₹ 1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.
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.
Method under which calculation of goodwill is done on the basis of extra profit earned above the normal profit.
Why is a new partner admitted?
____________ profit is excess of actual profits over normal profits.
Old partnership will dissolve if:
When there is no Goodwill Account in the books and goodwill is raised, ____________ account will be debited.
When the new partner is admitted goodwill can be treated in how many ways?
Jaya, Kirti, Ekta and Shewta are partners in the firm sharing profits and losses in the ratio of 2:1:2:1. On Jaya's retirement, the goodwill of the firm is valued at Rs. 36,000. Kirti, Ekta and Shewta decided to share future profits equally. What will be the necessary journal entry for the treatment of goodwill without opening a 'Goodwill Account'.
Excess value of Purchase Consideration over Net Assets at the time of purchase of business is credited to:
Analyse the case given below and answer the question that follow:
Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at the value of ₹ 60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3. Give the answer to the question given below:
How much will be transferred to Karan's Capital Account of the existing goodwill?
When the incoming partner brings his share of premium for goodwill in cash, it is adjusted by crediting to ______.
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.
Mohit and Govind were partners in a firm with a ratio of 1:2. They admitted Ravi for 1/5th share in profits. He brought ₹2,50,000 for capital but could not bring goodwill. The goodwill of the firm was valued at ₹3,00,000. What Journal Entry will be passed for the treatment of goodwill?
How is Goodwill of the firm created?
Profit for 2015, 2016 & 2017 is ₹ 10,000, ₹ 15,000 & ₹ 25,000. Calculate average profit.
A and B were partners in a firm sharing profits equally. Their capitals were : A ₹ 1,20,000 and B ₹ 80,000. The annual rate of interest is 20%. The profits of the firm for the last three years were ₹ 34,000; ₹ 38,000 and ₹ 30,000. They admitted C as a new partner. On C's admission the goodwill of the firm was valued at 2 years purchase of the super profits.
Calculate the value of goodwill of the firm on C's admission.
Manas and Mili are partners in a firm sharing profits in the ratio of 3 : 2. Anita is admitted as a new partner for `1/4`th share in future profits. Capitals of Manas and Mili were ₹ 3,00,000 and ₹ 1,50,000 respectively. Anita brought ₹ 2,00,000 as her capital. The value of goodwill of the firm on Anita's admission.
Nita and Samar are partners in a firm sharing profits in the ratio of 3 : 2. Their fixed capitals were ₹ 90,000 and ₹ 2,10,000 respectively. They admitted Mitali on April 1, 2022 as a new partner for 1/5th share in future profits. Mitali brought ₹ 1,50,000 as her capital. The value of goodwill of the firm of Mitali's admission was ______.
G, S and T were partners sharing profits in the ratio 3:2:1. G retired and his dues towards the firm including Capital balance, Accumulated profits and losses share, Revaluation Gain amounted to ₹ 5,80,000. G was being paid ₹ 7,00,000 in full settlement. For giving that additional amount of ₹ 1,20,000, S was debited for ₹ 40,000. Determine goodwill of the firm.
______ means profit which is earned over and above the normal profit.
______ = Average profit x No. of years of purchase
Choose the components required to calculate goodwill of a firm by capitalisation of average profits method.
P: The normal profits of a similar firm in the industry.
Q: The average profits of the firm.
R: The number of years purchase.
S: The actual capital employed in the business.
