Goodwill Solutions TS Grewal Class 12 [2025-26]
Table of Contents
Average Profit Method
Questions 1 to 3
Question 1:
Goodwill is to be valued at three years’ purchase of ………. Calculate amount of Goodwill.
Answer
Average Profit = \(\frac{12,000 + 18,000 + 16,000 + 14,000}{4}\) = \(\frac{60,000}{4}\) = 15,000
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 15,000 \(\times\) 3 = ₹ 45,000
Question 2:
Profits for the five years …….. 5 years’ average profit.
Answer
Average Profit = \(\frac{4,00,000 + 3,98,000 + 4,50,000 + 4,45,000 + 5,00,000}{5}\) = \(\frac{21,93,000}{5}\) = 4,38,600
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 4,38,600\(\times\) 4 = ₹ 17,54,400
Question 3:
Purav and Purvi are partners ………. Calculate the value of goodwill.
Answer
Average Profit of 4 years = \(\frac{15,000 + 16,000 + 10,000 + 15,500}{4}\) = \(\frac{56,500}{4}\) = 14,125
Average Profit of 5 years = \(\frac{15,000 + 16,000 + 10,000 + 15,500 + 14,000}{5}\) = \(\frac{70,500}{5}\) = 14,100
As the average profit over 4 years is higher.
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 14,125\(\times\) 4 = ₹ 56,500
Goodwill Solutions TS Grewal Class 12 [2025-26]
Average Profit Method when Past Adustments are made
Question 4 to 7
Question 4:
Asin and Shreyas were partners ……. abnormal loss being goods lost by fire.
Solution
Profits after adjustment:
2019 = 1,25,000
2020 = 1,00,000 + 25,000 = 1,25,000
2021 = 1,87,500
2022 = (62,500)
2023 = 1,25,000
Average Profit = \(\frac{1,25,000 + 1,25,000 + 1,87,500 – 62,500 + 1,25,000}{5}\) = \(\frac{5,00,000}{5}\) = 1,00,000
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 1,00,000\(\times\) 3 = ₹ 3,00,000
Question 5:
Tarang purchased Jyoti’s business ….. average profit of the last three years.
Solution
Profits after adjustment:
2021 = 1,00,000 – 12,500 = 87,500
2022 = 1,25,000 + 25,000 = 1,50,000
2023= 1,12,500 – 12,500 = 1,00,000
Average Profit = \(\frac{87,500 + 1,50,000 + 1,00,000}{3}\) = \(\frac{3,37,500}{3}\) = 1,12,500
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 1,12,500\(\times\) 2 = ₹ 2,25,000
Question 6:
Abhay, Babu and Charu are partners ……. after adjusting the above.
Solution
Profits after adjustment:
2019 = 1,50,000
2020 = 3,50,000
2021 = 5,00,000
2022 = 7,10,000 – 10,000 = 7,00,000
2023 = -5,90,000 + 1,00,000 – 25,000 – 10,000 = – 5,25,000
Average Profit = \(\frac{1,50,000 + 3,50,000 + 5,00,000 + 7,00,000 – 5,25,000}{5}\) = \(\frac{11,75,000}{5}\) = 2,35,000
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 2,35,000\(\times\) 4 = ₹ 9,40,000
Question 7:
Sumit purchased Amit’s business on 1st April, 2025 …….. Calculate the value of goodwill.
Solution
Profits after adjustment:
2022 = 80,000 + 20,000 = 1,00,000
2023 = 1,45,000 – 25,000 = 1,20,000
2024= 1,60,000 – 15,000 = 1,45,000
2025 = 2,00,000
Average Profit = \(\frac{1,00,000 + 1,20,000 + 1,45,000 + 2,00,000}{4}\) = \(\frac{5,65,000}{4}\) = 1,41,250
Goodwill = Average Profit \(\times\) Number of years’ purchase
\(\quad\)\(\quad\)\(\quad\)\(\;\) = 1,41,250\(\times\) 2 = ₹ 2,82,500
Goodwill Solutions TS Grewal Class 12 [2025-26]
Weighted Average Profit Method
Question No. 8 to 9
Question 8:
Profits of a firm for the year …….. 2021, 2022, 2023, 2024 and 2025.
Solution
Calculation of weighted Average Profit
| Years | Profit | Weight | Product |
| 2021 2022 2023 2024 2025 | 20,000 24,000 30,000 25,000 18,000 | 1 2 3 4 5 | 20,000 48,000 90,000 1,00,000 90,000 |
| Total | 15 | 3,48,000 |
Weighted Average Profit = \(\frac{Total Weighted Average Profit}{Total Weights}\)
\(\quad \quad \quad \quad \quad \quad \quad\quad\quad\) = \(\frac{3,48,000}{15}\) = 23,200
Goodwill = Weighted Average Proift \(\times\) 3 years of purchase
\(\quad \quad\quad \quad\) = 23,200 \(\times\) 3 = ₹ 69,600
Question 9:
Raman and Daman are partners sharing profits …….. Calculate the value of Goodwill.
Solution
Calculation of Weighted Average Profit
| Years | Profit | Weight | Product |
| 2022 2023 2024 | 1,40,000 – 50,000 – 40,000 = 50,000 1,01,000 – 50,000 – 40,000 = 11,000 1,30,000 – 50,000 – 40,000 = 40,000 | 1 2 3 | 50,000 22,000 1,20,000 |
| Total | 6 | 1,92,000 |
Weighted Average Profit = \(\frac{Total Weighted Average Profit}{Total Weights}\)
\(\quad \quad \quad \quad \quad \quad \quad\quad\quad\) = \(\frac{1,92,000}{6}\) = 32,000
Goodwill = Weighted Average Proift \(\times\) 4 years of purchase
\(\quad \quad\quad \quad\) = 32,000 \(\times\) 4 = ₹ 1,28,000
Goodwill Solutions TS Grewal Class 12 [2025-26]
Super Profit Method
Question No. 10 to 16
Question 10:
The Capital of the firm of Anuj and Benu is ……… Calculate the Goodwill of the firm.
Solution
Calculation of Actual Profit after salaries of partners
1st year = 3,00,000 – (60,000 \(\times\) 2) = 1,80,000
2nd year = 3,60,000 – (60,000 \(\times\) 2) = 2,40,000
3rd year = 4,20,000 – (60,000 \(\times\) 2) = 3,00,000
Average Profit = \(\frac{1,80,000 + 2,40,000 + 3,00,000}{3}\) = \(\frac{7,20,000}{3}\) = 2,40,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 10,00,000 \(\times\) \(\frac{15}{100}\) = 15,000
Super Profit = Average Profit – Normal Profit = 2,40,000 – 1,50,000 = 90,000
Goodwill = Super Profit \(\times\) 2 years of purchase
\(\quad \quad \quad \quad\) = 90,000 \(\times\) 2 = 1,80,000
Question 11:
Atul and Bipul had a firm in which they had ……. Calculate the value of Goodwill.
Solution
Average Profit = 16,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 50,000 \(\times\) \(\frac{15}{100}\) = 7,500
Super Profit = Average Profit – Normal Profit = 16,000 – 7,500 = 8,500
Goodwill = Super Profit \(\times\) 4 years of purchase
\(\quad \quad \quad \quad\) = 8,500 \(\times\) 4 = 34,000
Question 12:
Sakshi and Megha were partners sharing profits ……… if the normal rate of return is 10%.
Solution
Average Profit = 1,80,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 14,00,000 \(\times\) \(\frac{10}{100}\) = 1,40,000
Super Profit = Average Profit – Normal Profit = 1,80,000 – 1,40,000 = 40,000
Goodwill = Super Profit \(\times\) 5 years of purchase
\(\quad \quad \quad \quad\) = 40,000 \(\times\) 5 = 2,00,000
Question 13:
A and B were parterns in a firm sharing profits …….. Calculate the value of Goodwill of the firm on C’s admission.
Solution
Average Profit = \(\frac{34,000 + 38,000 + 30,000}{3}\) = \(\frac{1,02,000}{3}\) = 34,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = (1,20,000 + 80,000) \(\times\) \(\frac{20}{100}\) = 40,000
Super Profit = Average Profit – Normal Profit = 34,000 – 40,000 = -6,000
Since, the firm has negative super profit the firm does not have goodwill.
Question 14:
Average net profit expectd in future ……. on the basis of two year’s purchase of super profit.
Solution
Average Profit = Average Net Profit – Partners’ Remuneration = 36,000 – 6,000 = 30,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 2,00,000 \(\times\) \(\frac{10}{100}\) = 20,000
Super Profit = Average Profit – Normal Profit = 30,000 – 20,000 = 10,000
Goodwill = Super Profit \(\times\) 2 years of purchase
\(\quad \quad \quad \quad\) = 10,000 \(\times\) 2 = 20,000
Question 15:
A partnership firm earned net profits ……. during the above-mentioned three years.
Solution
Average Profit = \(\frac{17,000 + 20,000 + 23,000}{3}\) = \(\frac{60,000}{3}\) = 20,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 80,000 \(\times\) \(\frac{15}{100}\) = 12,000
Super Profit = Average Profit – Normal Profit = 20,000 – 12,000 = 8,000
Goodwill = Super Profit \(\times\) 2 years of purchase
\(\quad \quad \quad \quad\) = 8,000 \(\times\) 2 = 16,000
Question 16:
Amit and Kartik are partners sharing profits ……. Calculate Saurabh’s share of goodwill.
Solution
Average Profit = 30,000
Capital Employed = Partner’s Capitals + General Reserve = 1,40,000 + 20,000 = 1,60,000
Normal Profit = Capital employed \(\times\) Normal Rate of Return
\(\quad \quad \quad \quad\) = 1,60,000 \(\times\) \(\frac{12}{100}\) = 19,200
Super Profit = Average Profit – Normal Profit = 30,000 – 19,200 = 10,800
Goodwill = Super Profit \(\times\) 2 years of purchase
\(\quad \quad \quad \quad\) = 10,800 \(\times\) 4 = 43,200
Saurabh’s share of goodwill = 43,200 \(\times\) 1/3 = 14,400
Goodwill Solutions TS Grewal Class 12 [2025-26]
Calculation of Average Profit, Normal Rate of Return and Capital Employed
Questions 17 to 21
Question 17:
On 1st April, 2025, an existing firm has assets of ₹ 75,000 ……… average profit per year of the existing firm.
Solution
Capital Employed = Assets – Creditors = 75,000 – 5,000 = ₹70,000
or = Capital + Reserve = 60,000 + 10,000 = 70,000
Normal Profit = Capital Employed \(\times \) \(\frac{Normal Rate of Return}{100}\)
= 70,000 \(\times \) \(\frac{20}{100}\) = 14,000
Goodwill = Super Profit \(\times \) 4 years’ purchase
24,000 = (Average Profit – Normal Profit ) \(\times \) 4
\(\frac{24,000}{4}\) = Average Profit – 14,000
6,000 = Average Profit – 14,000
Average Profit = ₹ 20,000
Question 18:
On 1st April, 2023, a partnership firm ……. find the average profits of the firm.
Solution
Capital Employed = Assets -Outside Liabilities = 2,00,000 – 0 = ₹ 2,00,000
Normal Profit = Capital Employed \(\times \) \(\frac{Normal Rate of Return}{100}\)
= 2,00,000 \(\times \) \(\frac{10}{100}\) = 20,000
Goodwill = Super Profit \(\times \) 4 years’ purchase
60,000 = (Average Profit – Normal Profit ) \(\times \) 4
\(\frac{60,000}{4}\) = Average Profit – 20,000
15,000 = Average Profit – 20,000
Average Profit = ₹ 35,000
Question 19:
Average profit of a firm during …… find the capital employed by the firm.
Solution
Goodwill = Super Profit \(\times \) 4 years’ purchase
2,50,000= Super Profit \(\times \) 4
Super Profit = \(\frac{2,50,000}{4}\) = 62,500
Average Profit – Normal Profit = 62,500
2,00,000 – Normal Profit = 62,500
Normal Profit = 1,37,500
Normal Profit = Capital Employed \(\times \) \(\frac{Normal Rate of Return}{100}\)
1,37,500 = Capital Employed \(\times \) \(\frac{10}{100}\)
Capital Employed = 13,75,000
Question 20:
A business earned an average profit of ₹ 1,80,000 …… find normal rate of return.
Solution
Goodwill = Super Profit \(\times \) 2 years’ purchase
1,60,000= Super Profit \(\times \) 2
Super Profit = \(\frac{1,60,000}{2}\) = 80,000
Average Profit – Normal Profit = 80,000
1,80,000 – Normal Profit = 80,000
Normal Profit = 1,00,000
Normal Profit = Capital Employed \(\times \) \(\frac{Normal Rate of Return}{100}\)
1,00,000 = 1,25,000 \(\times \) \(\frac{Normal Rate of Return}{100}\)
Normal Rate of Return = \(\frac{1,00,000}{1,25,000}\) \(\times\) 100 = 8%
Question 21:
A business has earned average profit ….. find the capital employed of the firm.
Solution
Goodwill = Super Profit \(\times \) 3 years’ purchase
1,35,000= Super Profit \(\times \) 3
Super Profit = \(\frac{1,35,000}{3}\) = 45,000
Average Profit – Normal Profit = 45,000
1,20,000 – Normal Profit = 45,000
Normal Profit = 75,000
Normal Profit = Capital Employed \(\times \) \(\frac{Normal Rate of Return}{100}\)
75,000 = Capital Employed \(\times \) \(\frac{15}{100}\)
Capital Employed = 5,00,000
Super Proift Method when Past Adjustments are Made
Questions No. 22 to 24
Question 22:
Average profit earned by a firm is ₹ 1,00,000 which …….. on the basis of 5 times the super proift.
Solution
Adjusted Average Profit = Average Profit + Undervaluation of stock
\(\quad \quad \quad \quad\) = 1,00,000 + 40,000 = 1,40,000
Normal Profit = Capital employed \(\times\) \(\frac{Normal Rate of Retrun}{100}\)
\(\quad \quad \quad \quad\) = 6,30,000 \(\times\) \(\frac{5}{100}\) = 31,500
Super Profit = Adusted Average Profit – Normal Profit = 1,40,000 – 31,500 = 1,08,500
Goodwill = Super Profit (\times\) No. of years purchase = 1,08,500 (\times\) 5= 5,42,500
Question 23:
Average profit warned by a firm is ₹ 7,50,000 which …….. on the basis of 3 times the super proift.
Solution
Adjusted Average Profit = Average Profit – Overvaluation of stock
\(\quad \quad \quad \quad\) = 7,50,000 – 30,000 = 7,20,000
Normal Profit = Capital employed \(\times\) \(\frac{Normal Rate of Retrun}{100}\)
\(\quad \quad \quad \quad\) = 4,20,000 \(\times\) \(\frac{15}{100}\) = 6,30,000
Super Profit = Adusted Average Profit – Normal Profit = 7,20,000 – 6,30,000 = 90,000
Goodwill = Super Profit (\times\) No. of years purchase = 90,000 (\times\) 3= 2,70,000
Question 24:
Akshay and Amit are partners in a firm …… Calculate value of goodwill.
Solution
Calculation of Average Profit :
31st March 2021 = 1,50,000
31st March 2022 = 1,80,000
31st March 2023 = 1,00,000 + 1,00,000
31st March 2024 = 2,60,000 – 40,000 = 2,20,000
31st March 2025 = 2,40,000
Total Profit = 9,90,000
Average Profit = \(\frac{9,90,000}{5}\) = 1,98,000
Capital Employed = Total Assets – Outside Liabilities = 20,00,000 – 5,00,000 = 15,00,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Normal}{100}\)
\(\quad\quad\quad\quad\) = 15,00,000 \(\times\) \(\frac{10}{100}\) = 1,50,000
Super Profit = Average Profit – Normal Profit = 1,98,000 – 1,50,000 = 48,000
Goodwill = Super Profit \(\times\) No. of years purchase = 48,000 \(\times\) 3= 1,44,000
Capitalisation Method
Question No. 25 to 32
Question 25:
From the following information, …….. Profit for the year ₹ 2,00,000.
Solution
Total Capitalised Value of the firm = Averge Profit \(\times\)\(\frac{100}{Nornal Rate of Return}\)
(\quad \quad\quad \quad\quad\quad\quad\) = 2,000,00 \(\times\) \(\frac{100}{10}\) = 20,00,000
Goodwill = Total Vapitalised Value – Capital Employed
\(\quad \quad\) =20,00,000 – 16,00,000 = 4,00,000
Question 26:
A firm earned average profit of ₹ 3,00,000……. by capitalisation of average profit.
Solution
Total Capitalised Value of the firm = Averge Profit \(\times\)\(\frac{100}{Nornal Rate of Return}\)
\(\quad \quad\quad \quad\quad\quad\quad\) = 3,000,00 \(\times\) \(\frac{100}{15}\) = 20,00,000
Capital Employed = Assets – Liabilities = 17,00,000 – 2,00,000 = 15,00,000
Goodwill = Total Vapitalised Value – Capital Employed
\(\quad \quad\) =20,00,000 – 15,00,000 = 5,00,000
Question 27:
A and B were partners in a firm with……. by capitalisation of average profits method.
Solution
Total Capitalised Value of the firm = 7,50,000
Capital Employed = A’s Capital + B’s Capital = 3,00,000 + 2,00,000 = 5,00,000
Goodwill = Total Vapitalised Value – Capital Employed
\(\quad \quad\) =7,50,000 – 5,00,000 = 2,50,000
Question 28:
Puneet and Tarun are in restaurant business ………. by Capitalisation of Average Profit Method.
Solution
Total Capitalised Value of the firm = Averge Profit \(\times\)\(\frac{100}{Nornal Rate of Return}\)
\(\quad \quad\quad \quad\quad\quad\quad\) = 1,000,00 \(\times\) \(\frac{100}{10}\) = 10,00,000
Capital Employed = Partner’s Capital + Partner’s current = 2,50,000 + 2,50,000 + 30,000 + 20,000 = 5,50,000
Goodwill = Total Vapitalised Value – Capital Employed
\(\quad \quad\) =10,00,000 – 5,50,000 = 4,50,000
Question 29:
From the follwoing particulars, calculate value of goodwill …. Net Assets of the firm ₹ 2,00,000.
Solution
Averge Profit = \(\frac{59,000 + 67,000 + 39,000 + 42,000 + 54,000}{5}\) = \(\frac{2,61,000}{5}\) = 52,200
Total Capitalised Value of the firm = Averge Profit \(\times\)\(\frac{100}{Nornal Rate of Return}\)
\(\quad \quad\quad \quad\quad\quad\quad\) = 52,200 \(\times\) \(\frac{100}{20}\) = 2,61,00,000
Capital Employed =Net Assets = 2,00,000
Goodwill = Total Vapitalised Value – Capital Employed
\(\quad \quad\) =2,61,000 – 2,00,000 = 61,000
Question 30:
A business has earned average profit ……. and its external liabilites ₹ 7,20,000.
Solution
Capital Employed = Assets – External Liabilities = 40,00,000 – 7,20,000 = 32,80,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 32,80,000 \(\times\) \(\frac{10}{100}\) = 3,28,000
Super Profit = Average Profit – Normal Profit = 4,00,000 – 3,28,000 = 72,000
Case (i)
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 72,000 \(\times\) \(\frac{100}{10}\) = 7,20,000
Case (ii)
Goodwill = Supter Profit \(\times\) No. of years purchase =72,000 \(\times\)3 = 2,16,000
Question 31:
A firm earns proft of ₹ 5,00,000. Normal Rate of Return ……. of Average Profit Method.
Solution
Capital Employed = Total Assets – Outside Liabilities = 55,00,000 – 14,00,000 = 41,00,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 41,00,000 \(\times\) \(\frac{10}{100}\) = 4,10,000
Super Profit = Average Profit – Normal Profit = 5,00,000 – 4,10,000 = 90,000
Case (i)
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 90,000 \(\times\) \(\frac{100}{10}\) = 9,00,000
Case (ii)
Capital Employed = 41,00,000
Capitalised Value of the firm = Average Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 5,00,000\(\times\) \(\frac{100}{10}\) = 50,00,000
Goodwill = Capitalised Valued of the firm – Capital Employed = 50,00,00 – 41,00,000 = 9,00,000
Question 32:
On 1st April, 2018, a firm had assets of ₹ 1,00,000…….. find the actual profits of the firm.
Solution
Total Assets = Assets (excluding stock) + stock = 1,00,000 + 20000 = 1,20,000
Capital Employed = Total Assets – Current Liabilities = 1,20,000 – 10,000 = 1,10,000
Normal Profit = Capital Employed \(\times\)\(\frac{Normal Rate of Return}{100}\) = 1,10,000 \(\times\)\(\frac{8}{100}\) = 8,800
Goowill = Super Proift \(\times\) No. years of purchase
60,000 = Super Profit \(\times\)4
Super Profit = \(\frac{60,000}{4}\) = 15,000
Average Profit – Normal Profit = 15,000
Average Profit – 8,800 – 15,000 = 23,800
Solutions Goodwill TS Grewal Class 12 2025-26
Capitalistion of Super Profit
Questions No. 33 to 38
Question 33:
Average Profit of a firm …….. if super profits of the firm are ₹ 50,000.
Solution
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 50,000 \(\times\) \(\frac{100}{10}\) = 5,00,000
Question 34:
Raja Brothers earn an average profit of ₹ 30,000 with a capital of ₹ 2,00,000. The normal rate of return in the business is 10%. Using Capitalisation of super profit method. Workout the value of the goodwill of the firm.
Solution
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 2,00,000 \(\times\) \(\frac{10}{100}\) = 20,000
Super Profit = Average Profit – Normal Profit = 30,000 – 20,000 = 10,000
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 10,000 \(\times\) \(\frac{100}{10}\) = 1,00,000
Question 35:
Rajan and Rajani are partners in a firm. Their Capitals were Rajan ₹ 3,00,000; Rajani ₹ 2,00,000. During the year ended 31st March 2023, the firm earned a profit of ₹ 1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20%.
Solution
Capital Employed = Partners’s Capitals = 3,00,000 + 2,00,000 = 5,00,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 5,00,000 \(\times\) \(\frac{20}{100}\) = 1,00,000
Super Profit = Average Profit – Normal Profit = 1,50,000 – 1,00,000 = 50,000
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 50,000 \(\times\) \(\frac{100}{20}\) = 2,50,000
Question 36:
A business has earned an average profit of ₹ 8,00,000 during the last few years and the normal rate of return in a similar business is 10%. Find the value of goodwill by:
(i) Capitalisation of Super Profit Method; and
(ii) Super Profit Method if the goodwill is valued at 3 years’ purchase of super profit.Assets of the business were ₹ 80,00,000 and its external liabilities ₹ 14,40,000.
Solution
(i)
Capital Employed = Assets – External Liabilites = 80,00,000 – 14,40,000 = 65,60,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 65,60,000 \(\times\) \(\frac{10}{100}\) = 6,56,000
Super Profit = Average Profit – Normal Profit = 8,00,000 – 6,56,000 = 1,44,000
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 1,44,000 \(\times\) \(\frac{100}{10}\) = 14,40,000
(ii)
Goodwill = Super Profit \(\times\) 3 yeasrs of purchase = 1,44,000 \(\times \)3 = 4,32,000
Question 37:
Rohit and Hardik are partners sharing profits and losses equally. They decided to admit Surya as a partner for 1/3 share. For this purpose, the goodwill of the firm is to be valued. From the following information, calculate the value of goodwill by:
(i) Capitalisation of Average Profit Method.
(ii) Capitalisation of Super Profit Method.
| (a) Average Capital Employed | ₹ 6,00,000 |
| (b) Normal Rate of Return | 12% |
| (c) Profit for last three years: 2021-22 2022-23 2023-24 | ₹ 90,000 ₹ 80,000 ₹ 1,00,000 |
| (d) Assets (Excluding goodwill) | ₹ 10,00,000 |
| (e) Liabilities | ₹ 4,00,000 |
Solution
(i) Capitalisation of Average Profit Method.
Average Profit = \(\frac{90,000 + 80,000 + 1,00,000}{3}\) = \(\frac{2,70,000}{3}\) = 90,000
Capitalised Value of Average Profit = Average Profit \(\times\) \(\frac{100}{Normal Rate of Return}\)
\(\quad\quad\quad\quad\quad\quad\quad\quad\quad\) = 90,000 \(\times\) \(\frac{100}{12}\) = 7,50,000
Goodwill = Capitalised Value of Average Profit – Capital Employed = 7,50,000 – 1,50,000 = 6,00,000
(ii) Capitalisation of Super Profit Method.
Average Profit = 90,000
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 6,00,000 \(\times\) \(\frac{12}{100}\) = 72,000
Super Profit = Average Profit – Normal Profit = 90,000 – 72,000 = 18,000
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 18,000 \(\times\) \(\frac{100}{12}\) = 1,50,000
Question 38:
From the following information, Calculate the 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 2025 – ₹ 2,00,000, 31st March 2024 – ₹ 1,80,000, and 31st March 2023 – ₹ 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 a charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets, and non-trade investments is ₹ 7,00,000 whereas Partner’s Capital is ₹ 6,00,000 and Outside Liabilities ₹ 1,00,000.
Solution
(i) At three years’ purchase of Average profit.
Calculation of Actual Average Profit
31st March 2023 = 1,60,000 – 1,00,000 = 60,000
31st March 2024 = 1,80,000 – 1,00,000 = 80,000
31st March 2025 = 2,00,000 – 1,00,000 = 1,00,000
Average Profit = \(\frac{60,000 + 80,000 + 1,00,000}{3}\) = \(\frac{2,40,000}{3}\) = 80,000
Goodwill = Average Profit \(\times\) 3 years purchase = 80,000 \(\times\) 3 = 2,40,000
(iii) On the basis of Capitalisation of Super Profit.
Normal Profit = Capital Employed \(\times\) \(\frac{Normal Rate of Return}{100}\) = 6,00,000 \(\times\) \(\frac{10}{100}\) = 60,000
Super Profit = Average Profit – Normal Profit = 80,000 – 60,000 = 20,000
Goodwill = Super Profit\(\times\) 3 years purchase = 20,000 \(\times\) 3 = 60,000
(iii) On the basis of Capitalisation of Super Profit.
Goodwill = Super Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 20,000 \(\times\) \(\frac{100}{10}\) = 1,00,000
(iv) On the basis of Capitalisation of Average Profit.
Capitalised Value of Average Profit = Average Profit \(\times\) \(\frac{100}{Normal Rate of Return}\) = 80,000 \(\times\) \(\frac{100}{10}\) = 8,00,000
Capital Employed = Assets – Liabilities = 7,00,000 – 1,00,000 = 6,00,000
Goodwill = Capitalised value of Average Profit – Capital Employed = 8,00,000 – 6,00,000 = 2,00,000
Solutions Goodwill TS Grewal Class 12 2025-26
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