You visited us 1 times! Enjoying our articles? Unlock Full Access!

Byju's Answer

Standard XII

Accountancy

Goodwill Valuation (Retirement)

ABC are three...

Question

ABC are three partners in a firm, they decided to admit D, a fourth partner in the firm with 1/4 share of profit and loss in the firm. Firm decided to revalue the goodwill of the firm on the basis of 3 years purchase of past 4 years average profits. What would be the value of the firm if the past profit of the firm are as under?
2010 Rs. 18,000
2011 Rs. 21,000
2012 Rs. 20,000
2013 Rs.21,000

R s .80, 000

No worries! We‘ve got your back. Try BYJU‘S free classes today!

R s .60, 000

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

R s .75, 000

No worries! We‘ve got your back. Try BYJU‘S free classes today!

R s .63, 000

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is B $R s .60, 000$
Calculation of goodwill at the time of admission of D into partnership
1. Average profit = Total profit of last 4 years/ No. of years
Average profit = Rs. (18000 + 21000 + 20000 + 21000)/4
Average profit = Rs. 80000/ 4
Average profit = Rs. 20000
2. Goodwill = Average profit * No. of year's purchase
Goodwill = Rs. 20000 * 3
Goodwill = Rs. 60000

Suggest Corrections

Similar questions

Q. X,Y and Z are three partners in a firm.They are sharing profit and loss in the ratio of 3:2:1.On 11th Jan Y died. The firm decided to value goodwill based on 3 years purchase of weighted average of 5 years profit.The trading profit of the firm for the past five years before charging interest on capital was as under Rs.10,000,Rs.9,000,Rs.11,000,Rs.7,000,Rs.8,000. The capital of the firm stood Rs.50,000 and interest on capital of the firm stood Rs.50,000 and interest on capital is given at 8%. What is Y's share of goodwill?

Q. X & Associates is a partnership firm, it intends to revalue its goodwill, average profit for the past five years is Rs. 15,000 per annum and goodwill is being valued 5 years purchase of super profit. What would be the value of the goodwill of the firm if normal profit of the firm is Rs.12,000?

A

and

B

are equal partners. They decide to admit

C

for

{\frac{1}{3}}^{r d}

share. for the purpose of admission of

C

, goodwill of the firm is to be valued at four years purchase of super profit. Average capital employed in the firm is Rs.

1, 50, 000

. Normal rate of return may be taken as

15

p.a. Average profit of the firm Rs.

40, 000

. Calculate value of goodwill.

A and B are two partners in a firm with capital of Rs 10,000 and Rs 20,000 respectively. They admit C in firm for 1/4 the profits in the firm. C brings Rs 12,000 as his share of capital. What is the amount of goodwill ?

Q. Capital of the firm of Sharma and Verma is Rs.

2, 00, 000

and the market rate of interest is

15

. Annual salary to partners is rs.

12, 000

each. the profits for the last three years were

R s .60, 000, R s . 72, 000

and

R s .84, 000

. Goodwill is to be at

2

years purchase of last

3

years average super profit. calculate goodwill of the firm.

Join BYJU'S Learning Program