Valuation of Goodwill with Solution.

1. The firm’s average profit before charging partner’s remuneration was Rs. 25,000. Total investment of the partners in a firm was Rs. 80,000. Rate of return in similar business was 20%. Partner’s remuneration was Rs. 5,000. Goodwill to be valued at two year’s purchase of super profit. Find out value of goodwill. [Ans.]


2. 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.  [Ans.]

3. 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. [Ans.]


4. 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, [Ans]

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)


5. 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. [Ans.]

1st Year Rs,
10,000(Profit)
2nd Year Rs,
12,000(Profit)
3rd Year Rs,
4,000(Loss)
4th Year Rs,
18,000(Profit)






6.      The profit of a firm for the four years from 1991 to 1994 where_  [Ans.]
1991     
Rs, 40,000
1992
Rs, 45,000
1993
Rs, 55,000
1994
Rs, 53,000
     Calculate the goodwill of the firm at 2yrs. Purchase of the average profit for the last three years.   


Homework Sums [Try it Yourself]