This page includes solutions of all the Practical problems of this chapter from TS Grewal 2021 edition. Topics covered under this section are:
Average Profit Method
In this method goodwill is calculated by taking average of previous years profits and multiply by number of years purchase price. Question number 1 to 6 of TS Grewal 2021-22 are related to average profit method.
Average Profit Method when Past Adjustments are Made
Average Profit Method also comes with some adjustments where we need to eliminate the effect of abnormal gains and losses from the profits. Abnormal gain or losses are such events that happens rarely or are not a regular in nature. You can practice Question number 7 to 12 for this topic.
Weighted Average Profit Method
Valuation of goodwill is also calculated using weighted average profit method. In this method we need to give special weightage to specific years, normally recent year gets higher weight. You may practice Question 13 and 14 for this concept.
Super Profit Method
One of the method of valuation of goodwill is super profit method. in this method we need to calculate super profit before calculating goodwill. Super profit is calculated by deducting normal profit from average/actual profit earned during the year. Goodwill is valuated by multiplying super profit with number of years purchase price. Question number 15 to 22 are related to super profit method.
Super Profit Method when Pas Adjustments are Made
As in average profit method, we have to adjust abnormal profits or gains and losses before calculating average profit. Actual profit is always taken after eliminating the effects of these adjustments. You can practice Question number 23 to 25 for this topic.
Capitalisation Method
Capitalisation value of firm is to be calculated first. Goodwill is valuated as per capitalisation value of firm. This is done using average profit or super profit. Capitalisation method using average profit method can be practiced by question numbers 26 to 33 of ts grewal 2021-22 edition.
Capitalisation of Super Profit
Goodwill can also be valuated for any firm by using capitalisation of super profit method. To find the goodwill you need to first find out super profit. Question number 34 to 39 of TS Grewal 2021-22 edition are related to this topic.
Practical Problems
Average Profit Method – Question number 1-6
Average Profit Method when Past Adjustments are Made – Question number 7-12
Weighted Average Profit Method – Question number 13-14
Super Profit method – Question number 15-22
Super Profit Method when Past Adjustments are Made – Question number 23-25
Capitalisation Method – Question number 26-33
Capitalisation of Super Profit – Question number 34-39