From the following information, calculate value of goodwill of the firm: (i) At three years purchase of Average Profit. (ii) At three years purchase of Super Profit. (iii) On the basis of Capitalisation of Super Profit. (iv) On the basis of Capitalisation of Average profit. Information: (a) Average Capital Employed is ₹ 6,00,000. (b) Net Profit/(Loss) of the firm for the last three years ended are: 31st March, 2108 – ₹ 2,00,000, 31st March, 2107 – ₹ 1,80,000, and 31st March, 2106 – ₹ 1,60,000. (c) Normal Rate of Return in similar business is 10%. (d) Remuneration of ₹ 1,00,000 to partners is to be taken as charge against profit. (e) Assets of the firm (excluding goodwill, fictitious assets and not-trade investments) is ₹ 7,00,000 whereas Partners Capital is ₹ 6,00,000 and Outside Liabilities ₹ 1,00,000.

From the following information, calculate value of goodwill of the fir

1.	From the following information, calculate value of goodwill of the firm: (i) At three years purchase of Average Profit. (ii) At three years purchase of Super Profit. (iii) On the basis of Capitalisation of Super Profit. (iv) On the basis of Capitalisation of Average profit. Information: (a) Average Capital Employed is ₹ 6,00,000. (b) Net Profit/(Loss) of the firm for the last three years ended are: 31st March, 2108 – ₹ 2,00,000, 31st March, 2107 – ₹ 1,80,000, and 31st March, 2106 – ₹ 1,60,000. (c) Normal Rate of Return in similar business is 10%. (d) Remuneration of ₹ 1,00,000 to partners is to be taken as charge against profit. (e) Assets of the firm (excluding goodwill, fictitious assets and not-trade investments) is ₹ 7,00,000 whereas Partners Capital is ₹ 6,00,000 and Outside Liabilities ₹ 1,00,000.
Answer» n:(1) GoodwiII = Average Profit x Numbers of Years Purchase Goodwill = 80, 000 x 3 = 2, 40, 000 (2) Goodwill = Super Profit x Nu tubers of Years Purchase Goodwill = 20, 000 x 3 = 60, 000(3) Goodwill = Super Profit x Goodwill = 20, 000 x " = 2 00 000 (4) Goodwill = Capitalised Value - Net ASSET Goodwill = 8,00,000 - 6,00,000 = 2,00,000 WORKING Notes: Calculation Super Profits Average Profit - Average Profit = Average Profit = 1,80, 000 Capital employed = Total Assets - OUTSIDE liabilities Capital employed = Rs.7,00,000 - Rs.1,00,000 = Rs.6,00,000 Normal Profit= Capital Employed x Normal Profit = 6, 00, 000 x = 60,000 Super Profit = Average Profit (Adjusted) - Normal Profit Super Profit = Rs.80,000 - Rs.60,000 = Rs.20,000

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