Chapter 3 Goodwill:Nature and Valuation-TS Grewal’s 2021
TS Grewal question 7, 8, 9, 10, 11, 12
Question 7 Asin and Shreyas were partners sharing profit and losses in the ratio of 2:1.They admit Shyam as a partner for 1/5th share in profits.For this purpose Goodwill of the firm was to be valued on the basis of three year’s purchase of last five year’s average profit.Profits for the last five years ended 31st March,were:
| Year | 2017 | 2018 | 2019 | 2020 | 2021 |
| Profit’s (₹) | 125000 | 100000 | 187500 | (62500) | 125000 |
Calculate Goodwill of the firm after adjusting the following:
Profit of 2017-2018 was calculated after charging ₹25000 for abnormal loss of goods by fire.
Solution:
Asin and Shreyas were partners
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Question 8
Madhu and Vidhi are partners sharing profits in the ratio of 3:2. They decided to admit Manu as a partner from 1st April, 2021 on the following terms:
i. Manu will be given 2/5 share of the profit.
ii. Goodwill of the firm will be valued at two years purchase of three years normal average profit of the firm.
Profits of the previous three years ended 31st March were:
2021 – Profit ₹30,000 (after debiting loss of stock by fire ₹40000)
2020 – Loss ₹80,000 (includes voluntary retirement compensation paid ₹1,10,000).
2019 – Profit ₹1,10,000 (including a gain of ₹30,000 on the sale of fixed asset)
Calculate the value of Goodwill.
Solution:
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Question 9
Tarang purchased Jyoti’s business with effect from 1st April, 2021. Profit shown by Jyoti business for the last three financial years ended 31st March, were:
2019 : ₹1,00,000 (including an abnormal gain of ₹12,500)
2020 : ₹1,25,000 (after charging an abnormal loss of ₹25,000)
2021 : ₹1,12,500 (excluding ₹12,500 as insurance premium on firm property now to be insured)
Calculate the value of firm’s goodwill on the basis of two year’s purchase of the average profit of the last three years.
Solution:
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Question 10
Abhay Babu and Charu are partners sharing profits and losses equally. They agree to admit Daman for equal share of profit. The value of goodwill is to be calculated on the basis of four years purchase of average profit of last five years.
| Year | 2017 | 2018 | 2019 | 2020 | 2021 |
| Profit/Loss (in ₹) | 150000 | 350000 | 500000 | 710000 | (590000) |
On 1st April, 2020, a car costing ₹1,00,000 was purchased and debited to Travelling Expenses Account, on which depreciation is to be charged @ 25% p.a. Interest of ₹10,000 on Non-trade investments is credit to income for the year ended 31st March 2020 and 2021.
Calculate the value of goodwill after adjusting the above.
Solution:
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Question 11
Bhaskar and Pillai are partners sharing profits and losses in the ratio of 3:2. They admit Kanika into partnership for 1/4 share in profit. Kanika brings her share of goodwill in cash. Goodwill for this purpose is to be calculated at two years purchase of the average normal profit of past three years.
2019 – Profit ₹50,000 (including profit on sale of assets ₹5,000)
2020 – Loss ₹20,000 (including loss by fire ₹30,000)
2021 – Profit ₹70,000 (including insurance claim received ₹18,000 and interest on investments and dividend received ₹8,000)
Calculate the value of Goodwill. Also calculate Goodwill brought by Kanika.
Solution:
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Question 12
Sumit purchased Amit’s business on 1st April, 2021. Goodwill was decided to be valued at two years purchase of average normal profit of last four years.The profits for the past four years were
i. Abnormal loss of ₹20,000 was debited profit and loss account for the year ended 31st March, 2018
ii. A fixed asset was sold in the year ended 31st March, 2019 and gain of ₹25,000 was credited to profit and loss account
iii. In the year ended 31st March, 2020 assets of the firm were not insured due to oversight. Insurance premium not paid was ₹15,000.
Calculate the value of Goodwill.
Solution:
Click here for video explanation:- https://youtu.be/rrG7XKfa78w
Jump to other solutions of Goodwill:
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