Question : 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 fir was to be valued on the basis of three year; purchases 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 (Rs.) 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 Rs. 10,000 for abnormal loss of goods by fire
Option 1: Rs 50,000
Option 2: Rs 20,000
Option 3: Rs 1,00,000
Option 4: 1,20,000
Correct Answer: 1,20,000
Solution : Answer = Rs 1,20,000
CALCULATION OF NORMAL PROFIT
Year Adjustment (Rs.) Normal Profit (Rs.)
2013-14 50,000
2014-15 40,000 +10,000 (AbnormalLoss)= 50,000
2015-16 75,000
2016-17 (25,000)
2017-18 50,000
Total Normal Profit 2,00,000
Average Profit = Total Normal Profit/Number of Years = = Rs. 40,000
Goodwill = Average profit x no of years purchase
40,000x3 = RS 1,20,000. Hence, the correct option is 4.
Question : A, B and C were partners in a firm sharing profits in the ratio of 2:2:1.
The firm closes its books on 31st March, every year. On 31-12-2015 C died. On that date, his Capital account showed a credit balance of Rs.3,80,000 and Goodwill of the firm was valued at Rs. 1,20,000. There was a debit balance of Rs.50,000 in the Profit & Loss A/c.
C’s share of profit in the year of his death was to be calculated on the basis of the average profit of the last five years. The average profit for the last five years was Rs.75,000. Q. Amount due to C transferred to his executors’ account will be -----------
Option 1: 4,00,000
Option 2: RS 4,05,250
Option 3: Rs 4,05,000
Option 4: None of the above
Question : The profits earned by a business over the last 5 years are as follows:
Rs 24,000, Rs 26,000, Rs 28,000 Rs 36,000 and Rs 4,000 (loss) based on 2 years' purchase of last 5 years' profits. Value of goodwill will be:
Option 1: Rs 47,200
Option 2: Rs 44,000
Option 3: Rs 2,20,000
Option 4: Rs 2,26,000
Question : Following were the profits of the firm for the last 3 years
2,40,0000 (after charging abnormal loss of Rs 1,20,000)
3,60,000 (excluding Rs 1,20,000 payable on the insurance of machinery)
Goodwill of the firm on the basis of 4 years purchase of the average profit for the last three years will be
Option 1: Rs 12,00,000
Option 2: RS 10,80,000
Option 3: Rs 12,80,000
Option 4: none of these
Question : Capital invested in a firm is Rs. 10,00,000. Normal Rate of Return of 10%. The average profits of the firm are Rs. 1,28,000 (after an abnormal loss of Rs. 8,000). Value of Goodwill at two years' purchase of Super Profit will be
Option 1: Rs. 72,000
Option 2: Rs. 40,000
Option 3: Rs. 2,40,000
Option 4: Rs. 1,80,000
Question : Profits of last three years are Rs.4,20,000, Rs.3,90,000 and Rs.4,50,000. The value of goodwill on the basis of two years purchase of three year average profit is:
Option 1: Rs.3,60,000
Option 2: Rs.12,60,000
Option 3: Rs.8,40,000
Option 4: Rs.4,20,000
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