Problems on Valuation of goodwill

1. 1
Ms. PoonamNamjoshi
VALUATION OF GOODWILL
1. The profits of the firm for the last five years are 2002 Rs. 20,000; 2003 Rs. 16,000; 2004 Rs. 24,000;
2005 Rs. 8000; 2006 Rs. 12,000. Calculate the goodwill of the firm. [Ans. Rs. 16,000]
2. Mona, Reena and Sona have been carrying on a partnership business and good will of their firm is to
be valued at three years purchase of the average profit for the last five years. The profit and losses for
the last five years have been. 1st
Year Rs. 16,000, 2nd
Year, 15,000, 3rd
Year, 8,000(Loss), 4th
Year,
7,000, 5th
Year, 10,000. [Ans. Rs. 24,000]
3. Calculate the good will from the following information goodwill is valued at three years purchase of
average profit of the last six years. Profit and losses of the business in the last six years are as
follows, [Ans. Rs. 95,000]
1st
year, Rs, 40,000(Profit)
2nd
Year, Rs, 60,000(Profit)
3rd
Year, Rs, 10,000(Loss)
4th
Year, Rs, 50,000(Profit)
5th
Year, Rs, 30,000 (Loss)
6th
Year, Rs, 80,000(Profit)
4. Calculate the value of goodwill according to average profit method. Goodwill is valued at three years
purchase of last four year average profit. The profits and losses for the last four years are. [Ans. Rs.
27,000]
5. The profit of a firm for the four years from 1991 to 1994 where_ [Ans. Rs. 1,02,000]
2001 Rs, 40,000
2012 Rs, 45,000
2013 Rs, 55,000
2014 Rs, 53,000
Calculate the goodwill of the firm at 2yrs. Purchase of the average profit for the last three years.
6. Mr. X a businessperson has earned the following profits in the last five years.
2015 1, 05,800
2014 1, 02,600
2013 98,400
2012 96,800
2011 95,500
Value goodwill of Mr. X on the basis of three years purchase of average of the past five years.[Ans.
Rs. 2,99,460]
7. Good will is valued at three years purchase of last five years average profit. The profits for the last
five years are. [Ans. 0]
1st
Year 4,800(p)
2nd
Year 7,200(L)
3rd
Year 10,000(L)
4th
Year 3,000(P)
1st
Year Rs, 10,000(Profit)
2nd
Year Rs, 12,000(Profit)
3rd
Year Rs, 4,000(Loss)
4th
Year Rs, 18,000(Profit)

2. 2
Ms. PoonamNamjoshi
5th
Year 5,000(L)
Note: - Since the company’s average profit is negative. Therefore the firm’s goodwill is zero.
8. Compute the goodwill the following case good will is valued at three years purchase of average profit
of five years. The Profit of the five years were_ [Ans. Rs. 26,400]
1st
Year 5,800
2nd
Year 7,400
3rd
Year 20,000
4th
Year 3,500
5th
Year 7,300
9. A firm with an average capital employed of R s. 1, 60,000 is expected to earn Rs, 40,000 per annum
in future. Calculate goodwill at three times the super profit taking the normal rate of return as
15%. [Ans. Rs. 48,000]
10.Capital employed on 31st
December, 2010 was Rs, 1, 00,000/-. The Profits earned by the business for
the last 5 years where. [Ans. Rs. 87,000]
2006 30,000
2007 40,000
2008 50,000
2009 40,000
2010 60,000
Normal rate of return is 15%. Good will is valued at 3 years purchase of the super profits of the
business. Find out the value of goodwill.
11.The books of a business showed that the capital employed on 31st
December, 2012 was Rs.1, 00,000/-.
Profits for the last five years are_2008, 2009, 2010, 2011 & 2012 were Rs,60,000, Rs, 55,000, Rs,
75,000, Rs, 85,000 & Rs,65,000 respectively. Goodwill is valued at 2 years purchase of the Super
profit of the business. NRR is 10%. [Ans. Rs. 1, 16,000]
12.M/s XYZ partnership firm earned net profit during the last four years were Rs, 7,000. Rs, 13,000. Rs,
12,000 and Rs, 8,000. The capital investment made in the firm was Rs, 50,000. N.R.R on capital is
15%. The remuneration of the partners during the period is Rs, 500 p.a. Good will is valued at 2 Yrs
purchase of Average super profit of the above mentioned years. [Ans. Rs. 4,000]
13. M/s Vijay trading company earned net profit during the last four years was follows.
1st
Year Rs, 57,000
2nd
Year Rs, 44,000
3rd
Year Rs, 61,000
4th
Year Rs, 58,000
The capital investment made by the company is Rs,1, 50,000. Normal Rate of return on capital is
20%. The remuneration of the partners during this period is Rs, 500 p.m. Good will is valued at
2years purchase of Average Super profit of above mentioned period