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Ayub and Amit are partners in a firm and they admit Jaspal into partnership w. e. f. 1st April, 2018. They agreed to value goodwill at 3 years' purchase of Super Profit Method for which they decided to average profit of last 5 years. The profit for the last 5 years were: Year Ended Net Profit (₹) 31st March, 2014 1,50,000 31st March, 2015 1,80,000 31st March, 2016 1,00,000 ( Including abnormal loss of ₹ 1,00,000) 31st March, 2017 2,60,000 (Including abnormal gain (profit) of ₹ 40,000) 31st March, 2018 2,40,000 The firm has total assets of ₹ 20,00,000 and Outside Liabilities of ₹ 5,00,000 as on that date. Normal Rate of Return in similar business is 10%.Calculate value of goodwill.

Answer» Ayub and Amit are partners in a firm and they admit Jaspal into partnership w. e. f. 1st April, 2018. They agreed to value goodwill at 3 years' purchase of Super Profit Method for which they decided to average profit of last 5 years. The profit for the last 5 years were:

































Year Ended Net Profit (₹)
31st March, 2014 1,50,000
31st March, 2015 1,80,000
31st March, 2016 1,00,000 ( Including abnormal loss of ₹ 1,00,000)
31st March, 2017 2,60,000 (Including abnormal gain (profit) of ₹ 40,000)
31st March, 2018 2,40,000

The firm has total assets of ₹ 20,00,000 and Outside Liabilities of ₹ 5,00,000 as on that date. Normal Rate of Return in similar business is 10%.

Calculate value of goodwill.


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