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T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation

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Exercise/Page

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.20

Solution Ex. 1

 

Solution Ex. 2

  

Solution Ex. 3

 

 

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.21

Solution Ex. 4

 

Goodwill = Average Profit × Number of years purchase

Goodwill = 2,00,000 × 1.5 = Rs.3,00,000

Working Notes:

1.

 

Calculation of Profits (last 3 years)

Year

Profit

1st Year

1,00,000

2nd year

2,00,000 (1,00,000 × 2)

3rd year

3,00,000 (2,00,000 ×1.5)

Total

6,00,000

2.

Calculation Of Average profit

Solution Ex. 5

 

Goodwill = Normal Average Profit × Number of years' purchase

Normal Average Profit = 60,0000

Working Note:

Year

Actual Profit

+ 

Abnormal Loss

Non-Recurring

-

Abnormal Gain

Non-Recurring

=

Normal Profit

2018

30,000

+

40,000

-

Nil

=

70,000

2017

(80,000)

+

1,10,00

-

Nil

=

30,000

2016

1,10,000

+

Nil

-

30,000

=

80,000

Normal Profits for last 3 years

=

1,80,000

 

Solution Ex. 6

 

Goodwill = Normal Average Profit × Number of years' of purchase

 

Working Notes:

Year

Actual Profit

+ 

Abnormal Loss

Non-Recurring

-

Abnormal Gain

Non-Recurring

=

Normal Profit

2016

50,000

+

Nil

-

5,000

= 

45,000

2017

(20,000)

+

30,000

-

Nil

= 

10,000

2018

70,000

+

Nil

-

18,000 + 8,000

= 

44,000

Normal Profits for last 3 years

 

99,000

 

 

Solution Ex. 7

 

Computation of Goodwill:

 

 

Working Notes:

Calculation of Average Profit (Five Years)

 

Year

Profit

2013-14

14,000

2014-15

15,500

2015-16

10,000

2016-17

16,000

2017-18

15,000

Total Profit

70,500

Calculation of Average Profit (Four Years)

 

Year

Profit

2014-15

15,500

2015-16

10,000

2016-17

16,000

2017-18

15,000

Total Profit

56,500

Average Profits (4 Years) > Average Profits (5 Years)

Accordingly, for Goodwill Valuation, Average profits = 14,125

Solution Ex.8

Goodwill = Average Profit × Number of years Purchase

Goodwill = 1,41,250 ×2 = Rs.2,82,500

 

Working Notes:

1.

Calculation Of Normal Profits (31st March Closed)

Years

2015

2016

2017

2018

Profit /Loss

80,000

1,45,000

1,60,000

2,00,000

Adjustment

20,000

(25,000)

(15,000)

 

Normal Profit

1,00,000

1,20,000

1,45,000

2,00,000

 

Total of Normal Profit = 1,00,000 + 1,20,000 + 1,45,000 + 2,00,000

= Rs.5,65,000

 

2.

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.22

Solution Ex.9

Goodwill = Average Profit × Number of years Purchase

Goodwill = Rs.1,00,000 ×3 = Rs.3,00,000

 

Working Notes:

1.

 

Calculation Of Normal Profits (31st March Closed)

Years

2014

2015

2016

2017

2018

Profit /Loss

(90,000)

1,60,000

1,50,000

65,000

1,77,000

Adjustment

--

(50,000)

20,000

85,000@

(17,000)

Normal Profit

(90,000)

1,10,000

1,70,000

1,50,000

1,60,000

 

Total of Normal Profit = (-90,000) + 1,10,000 + 1,70,000 + 1,50,000 + 1,60,000

= Rs.5,00,000

 

@Adjustment Amount

Overhauling cost of second hand machinery (Wrongly accounted as expense instead of capital expenditure)

Rs.1,00,000

Less: Depreciation to be debited from Profit andLoss Account

Rs.15,000

Adjustment Normal profit added

Rs.85,000

 

2.

 

  

 

 

Solution Ex. 10

 

Working Notes:

Year

Profit

× 

Weight

=

Product

2014

20,000

× 

1

=

20,000

2015

24,000

× 

2

=

48,000

2016

30,000

× 

3

=

90,000

2017

25,000

× 

4

=

1,00,000

2018

18,000

× 

5

=

90,000

Total

15

 

3,48,000

  

Solution Ex. 11

 

Working Notes:

Year

Profit before Partners Remuneration

- 

Partners Remuneration

=

Profit after Partners Remuneration

2016

2,00,000

-

90,000

=

1,10,000

2017

2,30,000

-

90,000

=

1,40,000

2018

2,50,000

-

90,000

=

1,60,000

 

Year

Profit

× 

Weight

=

Product

2016

1,10,000

× 

1

=

1,10,000

2017

1,40,000

× 

2

=

2,80,000

2018

1,60,000

× 

3

=

4,80,000

Total

6

 

8,70,000

 

Solution Ex. 12

Goodwill = Weighted Average Profit × Number of years' Purchase

Goodwill = Rs.1,39,000 ×3 = Rs.4,17,000

 

Working Notes:

1.

 

Calculation Of Normal Profits (31st March Closed)

Years

2014

2015

2016

2017

2018

Profit /Loss

70,000

1,40,000

1,00,000

1,60,000

1,65,000

Adjustment

20,000

(30,000)

----

(10,000)

10,000

Normal Profit

90,000

1,10,000

1,00,000

1,50,000

1,75,000

 

 

2.

 

Calculation Of Weighted Average Profit (31st March Closed)

Years

2014

2015

2016

2017

2018

i. Normal Profit

90,000

1,10,000

1,00,000

1,50,000

1,75,000

ii. Adjustment (i ×ii)

1

2

3

4

5

Product

90,000

2,20,000

3,00,000

6,00,000

8,75,000

 

Total of weight = 1 + 2 + 3 + 4 + 5 = 15

Total of Product Profit  = 90,000 + 2,20,000 + 3,00,000 + 6,00,000 + 8,75,000

= Rs.20,85,000

  

 

 

Solution Ex. 13

Particulars

2014-15

2015-16

2016-17

2017-18

Profits

1,01,000

1,24,000

1,00,000

1,40,000

Repair Capitalised

 

 

+30,000

 

Depreciation

 

 

(1,000)

(2,900)

Overvaluation of Closing Stock

 

(12,000)

12,000

 

Management Cost

(24,000)

(24,000)

(24,000)

(24,000)

Sale Proceeds

 

(10,000)

 

 

Adjusted Profits

77,000

78,000

1,17,000

1,13,100

Weights

1

2

3

4

Product

77,000

1,56,0000

3,51,000

4,52,400

Working Notes:

Note 1: Depreciation on Rs.30,000 machinery is charged for only 4 months in the year 2016-17.

Note 2: Sale proceeds wrongly credited in 2015-16 have been deducted after adjusting for profit of Rs.1,000. No depreciation is charged, since date of sale is not given (assumed that the machinery is sold at the end of the year).

 

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.23

Solution Ex. 14

Solution Ex. 15

  

Solution Ex. 16

 

Solution Ex. 17

 

Solution Ex. 18

 

 

Year

Profit before Partners' Remuneration

_ 

Partners' Remuneration

=

Profit after Partners' Remuneration

2016

1,70,000

-

1,00,000

=

70,000

2017

2,00,000

-

1,00,000

=

1,00,000

2018

2,30,000

-

1,00,000

=

1,30,000

 

Solution Ex. 19

Solution Ex. 20

 

 

Year

Profit before Partners' Salary

_ 

Partners' Salary

=

Actual Profit after Salary

1

60,000

-

24,000

=

36,000

2

72,000

-

24,000

=

48,000

2

84,000

-

24,000

=

60,000

 

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.24

Solution Ex. 21

 

Solution Ex. 22

 

Solution Ex. 23

Average Profit earned by a firm = Rs.1,00,000

Undervaluation of Stock = Rs.40,000

Average Actual Profit

= Average Profit earned by a firm + Undervaluation of Stock

= 1,00,000 + 40,000

= Rs.1,40,000

 

Super Profit

 = Actual Average Profit -Normal Profit

= 1,40,000 -31,500 = Rs.1,08,500

Goodwill

= Super Profit × Number of Times

= 1,08,500 × 5

= Rs.5,42,500

Solution Ex. 24

Average Profit earned by a firm = Rs.7,50,000

Overvaluation of Stock = Rs.30,000

Average Actual Profit

= Average Profit earned by a firm - Overvaluation of Stock

= 7,50,000 - 30,000

= Rs.7,20,000

 

Super Profit = Actual Average Profit - Normal Profit

= 7,20,000 - 6,30,000

=Rs. 90,000

Goodwill = Super Profit × Number of Times

 = 90,000 × 3

= Rs.2,70,000

Solution Ex.25

 

1.

 

Calculation Of Normal Profits (31st March)

Years

2014

2015

2016

2017

2018

Profit /Loss

1,50,000

1,80,000

1,00,000

2,60,000

2,40,000

Adjustment

---

---

1,00,000

(40,000)

---

Normal Profit

1,50,000

1,80,000

2,00,000

2,20,000

2,40,000

 

Total of Normal Profit = 1,50,000 + 1,80,000 + 2,00,000 + 2,20,000 + 2,40,000

= Rs.9,90,000

 

2.

Calculation of Capital Employed

 

Capital employed = Total Assets - Outside liabilities

Capital employed = Rs.20,00,000 - Rs.5,00,000 = Rs.15,00,000

 

3.

Calculation Super Profit

 

 

Super Profit = Average Profit - Normal Profit

Super Profit = 1,98,000 - 1,50,000 = 48,000

Goodwill = Super Profit × Number of Year Purchase

 = 48,000 × 3

= Rs.1,44,000

Solution Ex. 26

 

Solution Ex.27

  

Solution Ex. 28

 

T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 2 - Goodwill: Nature and Valuation Page/Excercise 2.25

Solution Ex. 29

Given:

Average Profit - Rs.4,00,00

Normal Rate of Return -10%

(i) Goodwill by Capitalisation of super profit

Capital Employed = Assets -External Liabilities

 = 40,00,000 -7,20,000

  = Rs.32,80,000

 

Super Profit =Actual Profit -Normal Profit

 = 4,00,000 -3,28,000  =  Rs.72,000

= Rs.7,20,000

(ii) Super Profit Method if the goodwill is valued at 3 years purchase of super profits

Therefore, Goodwill is valued at Rs.2,16,000

Solution Ex.30

(i) Calculation of goodwill by capitalization of super profit method 

  

(ii) Calculation of Goodwill by capitalization of average profits method

Solution Ex.31

Working Notes:

Calculation Super Profit

  

 

Capital Employed

 

Capital employed = Total Assets - Outside liabilities

Capital employed = Rs.15,00,000 - Rs.3,00,000 = Rs.12,00,000

 

Normal Profit

 

Super Profit

Super Profit = Average Profit - Normal Profit

Super Profit = 2,00,000 - 1,20,000 = 80,000

 

 

Solution Ex.32

  

Solution Ex.33

Working Notes:

Calculation Super Profit

 

 

Super Profit = Average Profit - Normal Profit

Super Profit = 50,000 - 30,000 = 20,000

Solution Ex.34

(4) Goodwill = Capitalised Value -  Net Asset

Goodwill =8,00,000 - 6,00,000 = 2,00,000

 

Working Notes:

 

Calculation Super Profits

 

 

Capital employed = Total Assets - Outside liabilities

Capital employed = Rs.7,00,000 - Rs.1,00,000 = Rs.6,00,000

 

 

Super Profit = Average Profit (Adjusted) - Normal Profit

Super Profit = Rs.80,000 - Rs.60,000 = Rs.20,000

 

Text Book Solutions

CBSE XII Commerce - Accountancy

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