1. The profits of the firm for the last five years are 2002 Rs. 20,000; 2003 Rs. 16,000; 2004 Rs. 24,000; 2005 Rs. 8000; 2006 Rs. 12,000. Calculate the goodwill of the firm.
Answer: Rs. 16,000
2. Mona, Reena and Sona have been carrying on a partnership business and good will of their firm is to be valued at three years purchase of the average profit for the last five years. The profit and losses for the last five years have been. 1st Year Rs. 16,000, 2nd Year, 15,000, 3rd Year, 8,000(Loss), 4th Year, 7,000, 5th Year, 10,000.
Answer: Rs. 24,000
3. Calculate the good will from the following information goodwill is valued at three years purchase of average profit of the last six years. Profit and losses of the business in the last six years are as follows:
- 1st year: Rs. 40,000 (Profit)
- 2nd Year: Rs. 60,000 (Profit)
- 3rd Year: Rs. 10,000 (Loss)
- 4th Year: Rs. 50,000 (Profit)
- 5th Year: Rs. 30,000 (Loss)
- 6th Year: Rs. 80,000 (Profit)
Answer: Rs. 95,000
4. Calculate the value of goodwill according to average profit method. Goodwill is valued at three years purchase of last four year average profit. The profits and losses for the last four years are:
- 1st Year: Rs. 10,000 (Profit)
- 2nd Year: Rs. 12,000 (Profit)
- 3rd Year: Rs. 4,000 (Loss)
- 4th Year: Rs. 18,000 (Profit)
Answer: Rs. 27,000
5. The profit of a firm for the four years from 1991 to 1994 were:
- 1991: Rs. 40,000
- 1992: Rs. 45,000
- 1993: Rs. 55,000
- 1994: Rs. 53,000
Answer: Rs. 1,02,000
6. Mr. X a businessperson has earned the following profits in the last five years.
- 1995: Rs. 1,05,800
- 1994: Rs. 1,02,600
- 1993: Rs. 98,400
- 1992: Rs. 96,800
- 1991: Rs. 95,500
7. Good will is valued at three years purchase of last five years average profit. The profits for the last five years are.
- 1st Year: 4,800 (P)
- 2nd Year: 7,200 (L)
- 3rd Year: 10,000 (L)
- 4th Year: 3,000 (P)
- 5th Year: 5,000 (L)
Answer: 0
8. Compute the goodwill the following case good will is valued at three years purchase of average profit of five years. The Profit of the five years were:
- 1st Year: 5,800
- 2nd Year: 7,400
- 3rd Year: 20,000
- 4th Year: 3,500
- 5th Year: 7,300
Answer: Rs. 26,400
9. A firm with an average capital employed of Rs. 1,60,000 is expected to earn Rs. 40,000 per annum in future. Calculate goodwill at three times the super profit taking the normal rate of return as 15%.
Answer: Rs. 48,000
10. Capital employed on 31st December, 1990 was Rs. 1,00,000/-. The Profits earned by the business for the last 5 years were:
- 1986: 30,000
- 1987: 40,000
- 1988: 50,000
- 1989: 40,000
- 1990: 60,000
Answer: Rs. 87,000
11. The books of a business showed that the capital employed on 31st December, 1992 was Rs. 1,00,000/-. Profits for the last five years are 1988, 1989, 1990, 1991 & 1992 were Rs. 60,000, Rs. 55,000, Rs. 75,000, Rs. 85,000 & Rs. 65,000 respectively. Goodwill is valued at 2 years purchase of the Super profit of the business. NRR is 10%.
Answer: Rs. 1,16,000
12. M/s XYZ partnership firm earned net profit during the last four years were Rs. 7,000, Rs. 13,000, Rs. 12,000 and Rs. 8,000. The capital investment made in the firm was Rs. 50,000. N.R.R on capital is 15%. The remuneration of the partners during the period is Rs. 500 p.a. Good will is valued at 2 Yrs purchase of Average super profit of the above mentioned years.
Answer: Rs. 4,000
13. M/s Vijay trading company earned net profit during the last four years was follows:
- 1st Year: Rs. 57,000
- 2nd Year: Rs. 44,000
- 3rd Year: Rs. 61,000
- 4th Year: Rs. 58,000
Here are the step-by-step solutions for each of the 13 goodwill valuation questions based on the text you provided.
1. Simple Average Profit Method
Given: Profits for 5 years: Rs. 20,000; 16,000; 24,000; 8,000; 12,000.
Total Profit: 20,000 + 16,000 + 24,000 + 8,000 + 12,000 = Rs. 80,000
Average Profit: 80,000 / 5 = Rs. 16,000
(Note: The question does not specify the "years' purchase". In such cases, Goodwill is considered equal to the Average Profit).
Goodwill: Rs. 16,000
2. Average Profit Method (With Loss)
Given: 3 years' purchase of 5 years' average profit. Profits/Losses: 16k, 15k, (8k), 7k, 10k.
Total Profit: 16,000 + 15,000 - 8,000 + 7,000 + 10,000 = Rs. 40,000
Average Profit: 40,000 / 5 = Rs. 8,000
Goodwill: Average Profit × Number of Years' Purchase
Goodwill: 8,000 × 3 = Rs. 24,000
Goodwill: Rs. 24,000
3. Average Profit Method (6 Years)
Given: 3 years' purchase of 6 years' average profit. Profits/Losses: 40k, 60k, (10k), 50k, (30k), 80k.
Total Profit: 40,000 + 60,000 - 10,000 + 50,000 - 30,000 + 80,000 = Rs. 190,000
Average Profit: 190,000 / 6 = Rs. 31,666.67
Goodwill: 31,666.67 × 3 = Rs. 95,000
Goodwill: Rs. 95,000
4. Average Profit Method (4 Years)
Given: 3 years' purchase of 4 years' average profit. Profits/Losses: 10k, 12k, (4k), 18k.
Total Profit: 10,000 + 12,000 - 4,000 + 18,000 = Rs. 36,000
Average Profit: 36,000 / 4 = Rs. 9,000
Goodwill: 9,000 × 3 = Rs. 27,000
Goodwill: Rs. 27,000
5. Average Profit Method (Missing Variable)
Given: Profits from 1991-1994: 40k, 45k, 55k, 53k.
Total Profit: 40,000 + 45,000 + 55,000 + 53,000 = Rs. 193,000
Average Profit: 193,000 / 4 = Rs. 48,250
(Note: The question is cut off and missing the "years' purchase" multiplier. It is impossible to reach the answer key's Rs. 1,02,000 with this data unless there is a typo in the source profits or an unstated weighting).
Average Profit Calculated: Rs. 48,250
6. Average Profit Method (Incomplete Question)
Given: Profits for 5 years: 105.8k, 102.6k, 98.4k, 96.8k, 95.5k.
Total Profit: 1,05,800 + 1,02,600 + 98,400 + 96,800 + 95,500 = Rs. 499,100
Average Profit: 499,100 / 5 = Rs. 99,820
(Note: The question abruptly ends without asking for a specific years' purchase. Calculating the average profit is the furthest step possible).
Average Profit Calculated: Rs. 99,820
7. Average Profit Method (Net Loss)
Given: 3 years' purchase of 5 years' average profit. Profits/Losses: 4,800, (7,200), (10,000), 3,000, (5,000).
Total Profit/Loss: 4,800 - 7,200 - 10,000 + 3,000 - 5,000 = Rs. (14,400) Net Loss
Average Loss: -14,400 / 5 = Rs. (2,880)
(Note: Because the business is operating at a net average loss, there is no positive goodwill to value).
Goodwill: 0
8. Average Profit Method
Given: 3 years' purchase of 5 years' average profit. Profits: 5.8k, 7.4k, 20k, 3.5k, 7.3k.
Total Profit: 5,800 + 7,400 + 20,000 + 3,500 + 7,300 = Rs. 44,000
Average Profit: 44,000 / 5 = Rs. 8,800
Goodwill: 8,800 × 3 = Rs. 26,400
Goodwill: Rs. 26,400
9. Super Profit Method
Given: Capital Employed = Rs. 1,60,000; Expected (Average) Profit = Rs. 40,000; NRR = 15%; 3 times super profit.
Normal Profit: Capital Employed × NRR = 1,60,000 × 15% = Rs. 24,000
Super Profit: Average Profit - Normal Profit = 40,000 - 24,000 = Rs. 16,000
Goodwill: Super Profit × 3 = 16,000 × 3 = Rs. 48,000
Goodwill: Rs. 48,000
10. Super Profit Method (Missing Variables)
Given: Capital = Rs. 1,00,000. Profits: 30k, 40k, 50k, 40k, 60k.
Total Profit: 30,000 + 40,000 + 50,000 + 40,000 + 60,000 = Rs. 220,000
Average Profit: 220,000 / 5 = Rs. 44,000
(Note: The question is missing both the NRR and the Years' Purchase. To reach the provided answer of Rs. 87,000, we must assume an NRR of 15% and 3 Years' Purchase).
Normal Profit: 1,00,000 × 15% = Rs. 15,000
Super Profit: 44,000 - 15,000 = Rs. 29,000
Goodwill: 29,000 × 3 = Rs. 87,000
Goodwill: Rs. 87,000
11. Super Profit Method
Given: Capital = Rs. 1,00,000; NRR = 10%; 2 years' purchase of Super Profit. Profits: 60k, 55k, 75k, 85k, 65k.
Total Profit: 60,000 + 55,000 + 75,000 + 85,000 + 65,000 = Rs. 340,000
Average Profit: 340,000 / 5 = Rs. 68,000
Normal Profit: 1,00,000 × 10% = Rs. 10,000
Super Profit: 68,000 - 10,000 = Rs. 58,000
Goodwill: 58,000 × 2 = Rs. 1,16,000
Goodwill: Rs. 1,16,000
12. Super Profit Method (With Partner Remuneration)
Given: Capital = Rs. 50,000; NRR = 15%; Remuneration = Rs. 500 p.a.; 2 years' purchase. Profits: 7k, 13k, 12k, 8k.
Total Profit: 7,000 + 13,000 + 12,000 + 8,000 = Rs. 40,000
Average Profit: 40,000 / 4 = Rs. 10,000
Adjusted Average Profit: Average Profit - Remuneration = 10,000 - 500 = Rs. 9,500
Normal Profit: 50,000 × 15% = Rs. 7,500
Super Profit: 9,500 - 7,500 = Rs. 2,000
Goodwill: 2,000 × 2 = Rs. 4,000
Goodwill: Rs. 4,000
13. Average Profit Method (Incomplete Question)
Given: Profits: 57k, 44k, 61k, 58k.
Total Profit: 57,000 + 44,000 + 61,000 + 58,000 = Rs. 220,000
Average Profit: 220,000 / 4 = Rs. 55,000
(Note: The question cuts off here. Assuming it follows a similar pattern to the others, you would just multiply this Average Profit by whatever the "years' purchase" was meant to be).
Average Profit Calculated: Rs. 55,000