1. Sita and Rita and Geetha are partners in a firm sharing in the ratio of 4:3:1.
As per the
terms of partnership deed on the death of the partner, Goodwill was to be valued at 50%
of the net profits credited to the partner’s capital account during the last three completed
years before his death. Sita died on 25th February 2012. The profits for the last five
calendar years were
2007 – Rs. 60,000
2008 – Rs. 97,000
2009 – Rs.1,05,000
2010 – Rs. 30,000
2011 - Rs. 84,000
On the date of Sita’s death Building was found undervalued by Rs. 80,000 which was to be
considered. Calculate the amount of Sita’s share of goodwill in the firm and record the necessary
journal entries of goodwill and revaluation of building. The new profit-sharing ratio between
Rita and Geetha will be 1:1.
2. A firm has assets worth Rs.7,00,000 and liabilities Rs.2,00,000. It has earned profit
amounting to Rs. 62,000 during 2018-2019. If rate of return is 10%, the goodwill of the
firm based on Capitalisation Method will be
(a) Rs. 50,000
(b) Rs. 6,200
(c) Rs. 20,000
(d) None of these
3. Poorvika and Samhitha share profit and losses equally. Their capitals were Rs.1,20,000
and Rs. 80,000 respectively. There was also a balance of Rs. 60,000 in General Reserve
and revaluation gain amounted to Rs. 15,000. They admit their friend, Aravind with 1/5
share in profits. Aravind brings Rs. 90,000 as capital. The amount of goodwill of the firm
is:
(a) Rs. 85,000
(b) Rs.1,00,000
(c) Rs. 20,000
(d) None of these
4. The net profit of a firm, after providing for taxation for the past five years were
Rs.80,000; Rs.85,000; Rs.92,000; Rs.1,05,000 and Rs.1,18,000. The capital employed in
the business is Rs.5,00,000. The normal rate of return expected in this type of business is
12%. It is expected that the firm will be able to maintain its super profit for the next 4
years. Calculate the value of goodwill.
5. A and B are partners sharing profits in the ratio of 7: 3. Their capitals were Rs.2,00,000
and Rs.1,50,000 respectively. They admitted C on 1st April 2013 for 1/6th share in the
profits. C brought Rs.1,00,000 as his capital. Calculate the value of goodwill of the firm.
6. X and Y were partners sharing profits equally for the last 3 years. On 1st January 2016
they decided to share the future profits equally on that date the goodwill of the firm is
valued at 2 year’s purchase of last 3 years’ average profits. The profits of the firm is as
follows:
Year ended 31t December Profits (in Rs.)
2013 40,000
2014 50,000
2015 60,000
(i) Non-recurring income of Rs. 2,000 included in the profits of 2014
(ii) In 2013 goods were damaged by fire Rs. 5,000. Goods have not been insured but it was
insured in 2014 & 2015 and the Insurance premium paid Rs. 1,000 per year debited in the
Profit and Loss A/c.
Calculate the value of Goodwill.
7. A and B are partners in a firm. On 1st April 2017 they agree to admit C for equal share.
For this purpose goodwill is to be valued at 2 years purchase of average profits of the last
4 years which were as follows:
Year ending 31st March 2014 – Rs.1,60,000 (Profit)
Year ending 31st March 2015 – Rs.20,000 (Loss)
Year ending 31st March 2016 – Rs.2,00,000 (Profit)
Year ending 31st March 2017 – Rs.1,60,000 (Profit)
On 1st October 2014, a computer costing Rs.40,000 was purchased and debited to Office
Expenses account on which depreciation is to be charged @20%p.a. on straight line
method. Closing stock is over valued by Rs. 10,000 on 31st March 2017. Calculate the
value of goodwill.
8. Ganga and Jamuna are partners in a firm. Their capitals are Rs.6,00,000 and Rs.4,00,000
for Ganga and Jamuna respectively. During the year ended 31st March 2012, the firm
earned a profit of Rs.3,00,000. Assuming that the normal rate of return is 20%, calculate
the value of the goodwill of the firm.
I. By capitalisation method
II. By super profit method if the Goodwill is valued at 2 years purchase of Super profits.
9. Ravi and Kukesh are partners in a firm sharing profits equally. The fixed capitals of Ravi
and Kukesh are Rs.5,00,000 and Rs.2,00,00 respectively. On 1st April 2012, they
admitted Mohan as a new partner for 1/5th share of future profits. Mohan brought
Rs.3,00,000 as his capital. Calculate the value of goodwill of the firm and record
necessary Journal entries on Mohan’s admission.