1. X and Y are partners in a firm. They admit Z into partnership for equal share.

It was agreed that

goodwill will be valued at three years purchase of average profit of last five years. Profits for the
last five years were:

Year Ended 31.3.2014 31.3.2015 31.3.2016 31.3.2017 31.3.2018

Profit (Rs.) 90,000 (Loss) 1,60,000 1,50,000 65,000 1,77,000

Books of account of the firm revealed that:

(i) The firm had gain (profit) of Rs.50,000 from sale of machinery sold in the year ended 31 st
March, 2015. The gain (profit) was credited in profit and loss account.
(ii) There was an abnormal loss of Rs.20,000 incurred in the year ended 31 st march, 2016
because of a machine becoming obsolete in accident.
(iii) Overhauling cost of second hand machinery purchased on 1 st July, 2016 amounting to
Rs.1,00,000 was debited to repairs account. Depreciation is charged @ 20% p.a. on
written down value method.
Calculate the value of goodwill.

2. Ayub and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1 st April,2018.
They agreed to value goodwill at 3 years’ purchases of Super Profit Method for which they
decided to average profit of last 5 years. The profits for the last 5 years were:
Year ended Net Profit (Rs.)
31st March, 2014 1,50,000
st
31 March, 2015 1,80,000
st
31 March, 2016 1,00,000 (including abnormal loss of Rs.1,00,000)
31st March, 2017 2,60,000 (including abnormal gain (profit) of Rs.40,000)
st
31 March, 2018 2,40,000
The firm has total assets of Rs.20,00,000 and outside liabilities of Rs.5,00,000 as on that date .
Normal rate of return is similar business is 10%.
Calculate value of goodwill.

3. From the particulars, calculate value of goodwill of a firm by applying capitalization of average
profit method.
(i) Profit for last five consecutive years ending 31st March are: 2018- Rs.54,000; 2017-
Rs.42,000; 2016-Rs.39,000; 2015- Rs.67,000 and 2014- Rs.59,000.
(ii) Capitalization rate 20%.
(iii) Net assets of the firm Rs.2,00,000.
4. It was agreed to calculate the value of goodwill of a firm at three years’ purchase of the weighted
average profits of the past four years. The appropriate weights to be used to each year ended on
31st December are:- 1984:- 1; 1985:- 2; 1986:-3; 1987:- 4.
The profits for these years ended on 31st December are: 1984 Rs. 20,200; 1985 Rs.
24,800; 1986 Rs. 20,000; 1987 Rs. 30,000.
On a scrutiny of the accounts the following matters are revealed:-
(i) On 1st September, 1986 a major repair was made in respect of the plant incurring Rs.
6,000 which amount was charged to revenue. The paid sum is agreed to be
capitalized for goodwill calculation subject to adjustment of depreciation of 10% p.a.
on reducing balance method.
(ii) The closing stock for the year 1985 was over-valued by Rs. 2,400.
(iii) To cover management cost an annual charge of Rs. 4,800 should be made for the
purpose of goodwill valuation.

Compute the value of goodwill.

5.

Yash and Karan were partners in an interior designer firm. Their fixed capitals were 6,00,000 and
4,00,000 respectively. There were credit balances in their current accounts of ₹ 4,00,000 and 5,00,000
respectively. The firm had a balance of ₹ 1,00,000 in General Reserve. The firm did not have any liability.
They admitted Radhika into partnership for 1/4th share in the profits of the firm. The average profits of
the firm for the last five years were ₹ 5,00,000.

Calculate the value of goodwill of the firm by capitalisation of average profits method. The normal rate
of return in the business is 10%.

6.

Average profit earned by a firm is 2,50,000 which includes overvaluation of stock of 10,000 on average
basis. Capital invested in the business is 14,00,000 and the normal rate of return is 15%.

Calculate goodwill of the firm on the basis of 4 times the super profit.

7.

Average net profit of Home Depot expected in future is 54,000 per year. Average capital employed
in the business is 3,00.000. Normal Rate of Return is 10%. Management cost is estimated to be
9,000 p.a. and is to be considered as an expense.

Find the value of goodwill on the basis of two years' purchase of super profit.
8.

From the following information, calculate value of goodwill of M/s Amrit & Amar:

(i) At three years purchase of Average Profit.

(1) 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₹10,00,000 円

(b) Net Profit/Loss of the firm for the past years: 2023-₹3,00,000 (Profit): 2024-2,50,000 (Loss);
2025-8,50,000 (Profit).

(c) Normal Rate of Return on capital is 15%

(d) Management Cost as remuneration to each partner (Amrit and Amar) for their service-5,000
per month

(e) Assets (excluding goodwill)-12,00,000; Liabilities-1,00,000