RV Educations ( Classes by : Nishkaam Johar ;

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1. Goodwill is to be calculated on the basis of 40% of average profits of last 4 years which as follows:
Ist year profits 60,000
Iind year profits is 2½ times of IIIrd year profit
IIIrd year profit for the last 6 months is 20% of first year profit and remaining six months is two times of first
six months profit.
IVth year profit is 40% of profit of IInd year. Calculate Goodwill.
2. A,B and C have fixed capitals of Rs 50,000 , Rs 30,000 & Rs 20,000 resp. Interest on capital 5% p.a. has
been omitted.
Profit before Interest were:
Ist year 80,000 ; IInd year 60,000 ; IIIrd year 20,000
Partners’ salary Rs 2000 p.a. to each partner has been allowed out of aforesaid profits. Calculate Goodwill of
the firm at 3 times of average profits.
3. 2014-2015 Profits 30,000 (Including profit on sale of land Rs 40,000)
2015-2016 Loss 25,000 (After crediting claim for loss of asset 35000)
2016-2017 profit 50,000 ( before paying manager’s commission 10,000)
2017-2018 profit 40,000 (Including loss on sale of plant 10,000)
Goodwill is valued two times of average profits of last 4 years. Find out goodwill.
4. The average profit earned by a firm is Rs 80,000 which includes under valuation of stock of Rs 8000 on an
average basis. The capital invested in the business is Rs 8,00,000 and normal rate of return 8%.
Calculating goodwill of the firm on the basis 7 times the super profits.
5. Goodwill is to be valued at 4 years purchase of average profit of last 5 years. Profits for past 5 years are :
31 march 2018 30,000
31 march 2019 70,000
31 march 2020 1,00,000
31 march 2021 1,40,000
31 march 2022 (1,20,000)
On 1 april 2021 , 5 cycles costing Rs 20,000 were purchased and were wrongly debited to travelling
expenses. Depreciation on cycles was to be charged @ 25 % p.a.. Calculate value of Goodwill.
6. Goodwill was agreed to be valued at two years’ purchase of average profit of last 4 years. Profits of last 4
years were:
31 march 2019 70,000
31 march 2020 1,00,000
31 march 2021 55,000 (loss)
31 march 2022 1,44,000
Firm had abnormal gain of Rs 10,000 during the year ended 31 march 2019. Firm incurred abnormal
loss of Rs 20,000 during the year ended 31 march 2020.
 Repairs to car Rs 50,000 was wrongly debited to vehicles Account on 1st June 2020. Depreciation was
charged on vehicles @ 12 % p.a. on straight Line method.
Calculate the value of goodwill.
7. Goodwill is to be valued at 2 years purchase of the average profit of last four years which were as follows:
31st march 2019 50,000(profit)
31st march 2020 1,20,000(profit)
31st march 2021 1,80,000(profit)
st
31 march 2022 70,000(loss)
On 1st april 2021 a motor bike costing Rs 50,000 was purchased and debited to travelling expenses
account,on which depreciation is to be charged @ 20% by straight line method. The firm also paid an
annual insurance premium of Rs 20,000 which had not been charged to profit and loss account for all
the years, now to be charged.
8. A and B are partners and their fixed capitals are Rs 2,50,000 each. They have balances in their current
Accounts of Rs 30,000 and Rs 20,000(Dr.) resp. The firm does not have any liability. Average profits of
the firm Rs 1,00,000. If the normal rate of return is 10% .find the value of goodwill by capitalisation of
average profits method.
9. A,B and C are partners in 2:1:3 ratio. Their profits for the last three years were Rs 35,000 in 2017; Rs
30,000 in 2016 and Rs 50,000 in 2015. During 2016 (mid of year) a repair for Rs 10,000 was wrongly
capitalized to the value of building. Building is depreciated at 10% p.a. on WDV. Goodwill is valued at 2
years purchase of average profits of last three years after adjusting the profits.
10. Calculate goodwill of a firm on the basis of three years purchases of the weighted Average profits of the
last four years were:
31st march 2020 Rs 28,000
31st march 2021 Rs 27,000
st
31 march 2022 Rs 46,900
st
31 march 2023 Rs 53,000
(i) On 1st april 2020 voluntary retirement compensation paid Rs 9,000 which was charged to revenue
and on 31st march 2022 profit on sale of asset was Rs 900.
(ii) For the purpose of calculating Goodwill the company decided that the years ending 31.3.2020 and
31.3.2021 be weighted as 1 each (being covid affected) and for year ending 31.3.2022 and
31.3.2023 weights to be taken as 2 and 3 respectively.
11. Calculate the value of firm’s Goodwill valued at two years’ purchase of average profits of the last four
years. Profits for the past four years of the firm are as follows:
Year Profits(Rs) Adjustments to be made
2019-20 1,42,500 Two Items were ignored and to be accounted are:
Outstanding Expenses Rs 7,500
Commission Earned Rs 5,000
2020-21 1,85,000
2021-22 2,30,000 After including Lottery Income of Rs 7,500
2022-23 2,90,000 Personal Insurance premium Rs 45,000 paid for
Partner wrongly debited to Firm’s Account.
12. Calculate goodwill of a firm on the basis of three years’ purchase of the weighted average profit of the last
four years. Profits of these four years ended 31st march were:
Year Ended 31st march 2020 31st march 2021 31st march 2022 31st march 2023
Profit (Rs) 4,04,000 4,96,000 4,00,000 6,00,000
st
The weights assigned to each year ended 31 march are : 2020- 1; 2021- 2; 2022-3 ; 2023- 4.
 You are provided with the following additional information:
(i) On 31st march 2022, a major plant repair was undertaken for Rs 1,20,000 which was accounted as
expense. It is to be capitalized for goodwill calculation subject to adjustment of depreciation @
10% p.a. on Reducing balance method.
(ii) Closing Stock for the year ended 31st march 2021 was overvalued by Rs 48,000.
13. Rajan, Sajan and Mehar are partners sharing profits in the ratio of 3:2:1 resp. The goodwill of the firm will
be valued at 3 years’ purchase of super profits of the business calculated on the Average Profit of the last 4
years. Following particulars are available in respect of the business carried by them:
(i) Capital employed Rs 12,00,000
(ii) Net profit 2019-20: Rs 2,44,000; 2020-21: Rs 3,00,000; 2021-22: Rs 40,000( Loss) and 2022-
23: Rs 4,20,000.
(iii) Rate of return on capital invested in this type of business 12%.
(iv) Remuneration from alternative employment of the partners who are engaged full time in the
business Rs 24,000 p.a. each.