Tamil Nadu Board of Secondary EducationHSC Commerce Class 12th

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide chapter 4 - Goodwill in partnership accounts [Latest edition]

Chapter 4: Goodwill in partnership accounts

Multiple choice questions [Pages 131 - 132]

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide Chapter 4 Goodwill in partnership accountsMultiple choice questions [Pages 131 - 132]

Multiple choice questions | Q I 1. | Page 131

Which of the following statements is true?

• Goodwill is an intangible asset

• Goodwill is a current asset

• Goodwill is a fictitious asset

• Goodwill cannot be acquired

Multiple choice questions | Q I 2. | Page 132

Super profit is the difference between _____________.

• Capital employed and average profit

• Assets and liabilities

• Average profit and normal profit

• Current year’s profit and average profit

Multiple choice questions | Q I 3. | Page 132

The average rate of return of similar concerns is considered as __________.

• Average profit

• Normal rate of return

• Expected rate of return

• None of these

Multiple choice questions | Q I 4. | Page 132

Which of the following is true?

• Super profit = "Total profit"/"Number of years"

• Super profit = "Weighted profit"/"Number of years"

• Super profit = Average profit – Normal profit

• Super profit = Average profit × Years of purchase

Multiple choice questions | Q I 5. | Page 132

Identify the incorrect pair

• Goodwill under Average profit method - Average profit × Number of years of purchase

• Goodwill under Super profit method - Super profit × Number of years of purchase

• Goodwill under Annuity method - Average profit × Present value annuity factor

• Goodwill under Weighted average profit method - Weighted average profit × Number of years of purchase

Multiple choice questions | Q I 6. | Page 132

When the average profit is ₹ 25,000 and the normal profit is ₹ 15,000, super profit is __________.

• ₹ 25,000

• ₹ 5,000

• ₹ 10,000

• ₹ 15,000

Multiple choice questions | Q I 7. | Page 132

Book profit of 2017 is ₹ 35,000; non-recurring income included in the profit is ₹ 1,000 and abnormal loss charged in the year 2017 was ₹ 2,000, then the adjusted profit is ____________.

• ₹ 36,000

• ₹ 35,000

• ₹ 38,000

• ₹ 34,000

Multiple choice questions | Q I 8. | Page 132

The total capitalised value of a business is ₹ 1,00,000; assets are ₹ 1,50,000 and liabilities are ₹ 80,000. The value of goodwill as per the capitalisation method will be ___________.

• ₹ 40,000

• ₹ 70,000

• ₹ 1,00,000

• ₹ 30,000

Very short answer questions [Pages 2 - 133]

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide Chapter 4 Goodwill in partnership accountsVery short answer questions [Pages 2 - 133]

Very short answer questions | Q II 1. | Page 133

What is goodwill?

Very short answer questions | Q II 2. | Page 133

What has acquired goodwill?

Very short answer questions | Q II 3. | Page 133

What is super profit?

Very short answer questions | Q II 4. | Page 133

What is a normal rate of return?

Very short answer questions | Q II 5. | Page 2

State any two circumstances under which the goodwill of a partnership firm is valued.

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide Chapter 4 Goodwill in partnership accountsShort answer questions [Page 133]

Short answer questions | Q III 1. | Page 133

State any six factors determining goodwill.

Short answer questions | Q III 2. | Page 133

How is goodwill calculated under the super profits method?

Short answer questions | Q III 3. | Page 133

How is the value of goodwill calculated under the capitalisation method?

Short answer questions | Q III 4. | Page 133

Compute average profit from the following information.

2016: ₹ 8,000; 2017: ₹ 10,000; 2018: ₹ 9,000

Short answer questions | Q III 5. | Page 133

Calculate the value of goodwill at 2 years purchase of average profit when average profit is ₹ 15,000.

Exercises [Pages 132 - 135]

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide Chapter 4 Goodwill in partnership accountsExercises [Pages 132 - 135]

Simple average profit method

Exercises | Q IV 1. | Page 133

The following are the profits of a firm in the last five years: 2014:

₹ 10,000; 2015: ₹ 11,000; 2016: ₹ 12,000; 2017: ₹ 13,000 and 2018: ₹ 14,000

Calculate the value of goodwill at 2 years purchase of average profit of five years.

Exercises | Q IV 2. | Page 133

From the following information, calculate the value of goodwill on the basis of 3 years purchase of average profits of last four years.

 Year Result Amount (₹) 2015 Profit 5,000 2016 Profit 8,000 2017 Loss 3,000 2018 Profit 6,000
Exercises | Q IV 3. | Page 134

From the following information relating to a partnership firm, find out the value of its goodwill based on 3 years purchase of average profits of the last 4 years:

1. Profits of the years 2015, 2016, 2017 and 2018 are ₹ 10,000, ₹ 12,500, ₹ 12,000 and ₹ 11,500 respectively.
2. The business was looked after by a partner and his fair remuneration amounts to ₹ 1,500 per year. This amount was not considered in the calculation of the above profits.
Exercises | Q IV 4. | Page 134

From the following information relating to Sridevi enterprises, calculate the value of goodwill on the basis of 4 years purchase of the average profits of 3 years.

1. Profits for the years ending 31st December 2016, 2017 and 2018 were ₹ 1,75,000, ₹ 1,50,000 and ₹ 2,00,000 respectively.
2. A non-recurring income of ₹ 45,000 is included in the profits of the year 2016.
3. The closing stock of the year 2017 was overvalued by ₹ 30,000.
Exercises | Q IV 5. | Page 134

The following particulars are available in respect of the business carried on by a partnership firm:

1. Profits earned: 2016: ₹ 25,000; 2017: ₹ 23,000 and 2018: ₹ 26,000.
2. Profit of 2016 includes a non-recurring income of ₹ 2,500.
3. Profit of 2017 is reduced by ₹ 3,500 due to stock destroyed by fire.
4. The stock was not insured. But, it is decided to insure the stock in the future. The insurance premium is estimated to be ₹ 250 per annum.

You are required to calculate the value of goodwill of the firm on the basis of 2 years purchase of average profits of the last three years.

Weighted average profit method

Exercises | Q IV 6. | Page 134

Find out the value of goodwill at three years purchase of weighted average profit of last four years.

 Year Profit₹ Weight 2015 10,000 1 2016 12,000 2 2017 16,000 3 2018 18,000 4

Purchase of super profit method

Exercises | Q IV 7. | Page 135

From the following details, calculate the value of goodwill at 2 years purchase of super profit:

1. Total assets of a firm are ₹ 5,00,000
2. The liabilities of the firm are ₹ 2,00,000
3. Normal rate of return in this class of business is 12.5%.
4. Average profit of the firm is ₹ 60,000.
Exercises | Q IV 8. | Page 135

A partnership firm earned net profits during the last three years as follows:

2016: ₹ 20,000; 2017: ₹ 17,000 and 2018: ₹ 23,000

The capital investment of the firm throughout the above mentioned period has been ₹ 80,000. Having regard to the risk involved, 15% is considered to be a fair return on capital employed in the business. Calculate the value of goodwill on the basis of 2 years purchase of super profit.

Annuity method

Exercises | Q IV 9. | Page 135

From the following information, calculate the value of goodwill under the annuity method:

 Particulars ₹ Average profit 14,000 Normal Profit 4,000 Normal rate of return 15% Years of purchase of goodwill 5

Present value of ₹ 1 for 5 years at 15% per annum as per the annuity table is 3.352

Capitalisation of super profit method

Exercises | Q IV 10. | Page 135

Find out the value of goodwill by capitalising super profits:

1. Normal Rate of Return 10%
2. Profits for the last four years are ₹ 30,000, ₹ 40,000, ₹ 50,000 and ₹ 45,000.
3. A non-recurring income of ₹ 3,000 is included in the above mentioned profit of ₹ 30,000.
4. Average capital employed is ₹ 3,00,000.

Capitalisation method

Exercises | Q IV 11. | Page 132

From the following information, find out the value of goodwill by capitalisation method:

1. Average profit ₹ 20,000
2. Normal rate of return 10%
3. Tangible assets of the firm ₹ 2,20,000
4. Liabilities of the firm ₹ 70,000.

Tamil Nadu Board Samacheer Kalvi solutions for Class 12th Accountancy Answers Guide chapter 4 - Goodwill in partnership accounts

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Concepts covered in Class 12th Accountancy Answers Guide chapter 4 Goodwill in partnership accounts are Classification of Goodwill, Goodwill in Partnership Accounts, Nature of Goodwill, Methods of Valuation of Goodwill, Factors Determining the Value of Goodwill of a Partnership Firm, Need for Valuation of Goodwill of Partnership Firms.

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