Question 1.
Goodwill is to be valued at three years’ purchase of four years’ average profit. Profits for last four (ending on 31st March of the firm were: 2013 – Rs.12,000; 2014 – Rs.18,000; 2015 – Rs.16,000; 2016- Rs.14,000.
Calculate amount of Goodwill.
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Question 2.

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Question 3.
A and B are partners sharing profits in the ratio of 3:2. They decided to admit C as a partner from, 1st April, 2016 on the following terms:
i. C will be given 2/5th share of the profit.
ii. Goodwill of the firm will be valued at two years’ purchase of three years’ normal average profits of the firm.
Profits of the previous three years ended 31st March were:
2016- Profit Rs.30,000 (after debiting loss of stock by fire Rs.40,000).
2015 – Loss Rs.80,000 (includes voluntary retirement compensation paid 1, 10,000).
2014 – Profit Rs.1,10,000 (including a profit of 30,000 on the sale of fixed assets).
You are required to value the goodwill.
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Question 4.
X and Y are partners sharing profits and losses in the ratio of 3: 2. They admit Z into partnership for 1/4th share in goodwill. Z brings in his 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. Profits of the last three years ended 31st March, were:
2014 – Profit Rs.50,000 (including profits on sale of assets Rs.5,000).
2015 – Loss Rs.20,000 (including loss by fire Rs.30,000).
2016- Profit Rs.70,000 (including insurance claim received Rs.18,000 and interest on investments and Dividend received Rs.8,000).
Calculate value of goodwill. Also, calculate goodwill brought in by Z.
[Ans.: Goodwill-Rs.66,000; Z shall bring 1/4th of Rs.66,000 = Rs.16,500 as Goodwill]
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Question 5.

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Question 6.
A and B are partners sharing profits and losses in the ratio of 5:3. On 1st April, 2016, C is admit the partnership for 1/4th share of profits. For this purpose, goodwill is to be valued at two purchases of last three years’ profits (after allowing partners’ remuneration). Profits to be weightier 1:2:3, the greatest weight being given to last year. Net profit before partners’ remuneration 2013-14: Rs.2,00,000; 2014-15: Rs.2,30,000; 2015-16: Rs.2,50,000. The remuneration of the part estimated to be Rs.90,000 p.a. Calculate amount of goodwill.
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Question 7.

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Question 8.
Gupta and Bose had a firm in which they had invested Rs.50,000. On an average, the profits where Rs.16,000. The usual rate of earning in the industry is @15%. Goodwill is to be valued at four years’ purchase of profits in excess of profits @15% on the money invested. Value the goodwill.
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Question 9.
Rakesh and Ashok earned a profit of Rs.5,000. They employed capital of Rs.25,000 in the firm. It is expected that the average rate of profit is 15% of the capital. Calculate amount of goodwill if goodwill is value at three years’ purchase of super profit.
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Question 10.
The average net profits expected in the future by XYZ firm are Rs.36,000 per year. The average capital employed in the business by the firm is Rs.2,00,000. The rate of interest expected from capital invested in this class of business is 10%. The remuneration of the partners is estimated to be 6,000 p.a. Find out the value of goodwill on the basis of two years’ purchase of super profit.
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Question 11.
A partnership firm earned the net profits during the last three years ended 31st March as following:
2014 – Rs.17,000; 2015 – Rs.20,000; 2016 – Rs.23,000.
The capital investment in the firm throughout the above-mentioned period has been Rs.80,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital Calculate value of goodwill on the basis of two years’ purchases of average super profit earned during the above-mentioned three years
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Question 12.

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Question 13.
A business earned an average profit of 8,00,000 during the last few years. The normal rate of profit in the similar type of business is 10%. The total value of assets and liabilities of the business were Rs.22,00,000 and Rs.5,60,000 respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at 2½ years’ purchase of super profits.
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Question 14.
A firm earned net profits during the last five years as follows: I-Rs.7,000; II – Rs.6,500; III-Rs.8,000; IV- Rs.7,500 and V- Rs.6,000. Capital investment of the firm is Rs.40,000. Fair return on capital in the market is 12%. Find value of goodwill of the business if it is based on three years’ purchase of average super profit of the past five years.
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Question 15.
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 Rs.60,000; Rs.72,000 and Rs.84,000. Goodwill is to be valued at 2 years’ purchase of last 3 years’ average super profit. Calculate goodwill of the firm.
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Question 16.
A and B are equal partners. They decide to admit C for 1/3rd 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 is Rs.40,000. Calculate value of goodwill.
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Question 17.
On 1st April, 2016, an existing firm had assets of Rs.75,000 including cash of Rs.5,000 Its creditors amounted to Rs.5,000 on that date. The firm had a Reserve of Rs.10,000 while Partners’ Capital Accounts showed a balance of Rs.60,000. If Normal Rate of Return is 20% and goodwill of the firm Rs.24,000 at four years’ purchase of super profit, find average profit per year of the existing firm.
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Question 18.
The average profit earned by a firm is Rs.1,00,000 which includes overvaluation of stock of Rs.40,000 on an average basis. The capital invested in the business is Rs.6,30,000 and the normal rate of return is 15%. Calculate goodwill of the firm on the basis of 5 times the super profit.
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Question 19.
The average profit earned by a firm is Rs.7,50,000 which includes overvaluation of stock of Rs.30,000 on an average basis. The capital invested in the business is t Rs.42,00,000 and the normal rate of return is 15%.
Calculate goodwill of the firm on the basis of 3 times the super profit.
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Question 20.
From the following information, calculate value of goodwill of the firm by applying Capitalisation Method:
Total Capital of the firm Rs.16,00,000
Reasonable rate of return 10%
Profit for the year Rs.2,00,000
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Question 21.
A firm earns Rs.3,00,000 as its annual profits, the rate of return being 12%. Assets and liabilities of the firm amounted to Rs.36Rs.12,00,000 respectively. Calculate value of goodwill by Capitalisation Method.
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Question 22.
A firm earns profit of Rs.5,00,000. Normal Rate of Return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders’ liabilities as on the date of goodwill are Rs.55,00,000 and Rs.14,00,000 respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.
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Question 23.
From the following particulars, calculate value of goodwill of a firm by applying Capitalisation of Average Profit Method:
Profits of last five consecutive years ending 31st March are: 2016-Rs.54,000; 2015 – Rs.42,000; 2014 – Rs.39,000; 2013 – Rs.67,000 and 2012- Rs.59,000.
Capitalisation rate 20%.
Net assets of the firm Rs.2,00,000.
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Question 24.
A business has earned average profit of Rs.4,00,000 during the last few years and the normal rate return in similar business is 10%. Find value of goodwill by
i. Capitalisation of Super Profit Method,
ii. Super profit Method if the goodwill is valued at 3 years’ purchase of super profits.
Assets of the business were Rs.40,00,000 and its external liabilities Rs.7,20,000
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