Question:

Find the capitalized value.

Posted by: Parmjeet on 02.09.2020

The profits after adjustments will be (15,000),90,000 and 45,000 so the Average profit of 3years will be 40,000 and Goodwill will be 40,000 * 2 i.e. 80,000.
The profits after adjustments will be (15,000),90,000 and 45,000 so the Average profit of 3years will be 40,000 and Goodwill will be 40,000 * 2 i.e. 80,000.
The profits after adjustments will be (15,000),90,000 and 45,000 so the Average profit of 3years will be 40,000 and Goodwill will be 40,000 * 2 i.e. 80,000.

Table showing Adjusted Profit for the last 3 years.

2014      Net Profit as per P/L A/c.                                                        20,000

Less: Abnormal Gain (Insurance claims)                              (35,000)                (15,000)

2015     Net Loss as per P/L A/c.                                                        (15,000)

Add: Abnormal Loss (Retirement Compensation)                1,05,000                  90,000

2016     Net Profit as per P/L A/c.                                                         75,000

Less: Abnormal Gain (Profit on sale of Fixed Assets)           (30,000)                  45,000

Adjusted Total Profit of Last 3 Years (1,35,000 – 15,000)                             1,20,000

Average Profit =Total Profit of Last 3 Years / No of Years  = 1,20,000 / 3 = 40,000

Therefore Goodwill = Average profit   X  No of years of Purchase

= 40,000  X  2    = Rs. 80,000

Note:

(i) Abnormal Gain (Profit) should be Subtracted from the Net Profit or Net Loss.

(ii) Abnormal Loss should be Added with the Net Profit or Net Loss.

Table showing Adjusted Profit for the last 3 years.

2014      Net Profit as per P/L A/c.                                                        20,000

Less: Abnormal Gain (Insurance claims)                              (35,000)                (15,000)

2015     Net Loss as per P/L A/c.                                                        (15,000)

Add: Abnormal Loss (Retirement Compensation)                1,05,000                  90,000

2016     Net Profit as per P/L A/c.                                                         75,000

Less: Abnormal Gain (Profit on sale of Fixed Assets)           (30,000)                  45,000

Adjusted Total Profit of Last 3 Years (1,35,000 – 15,000)                             1,20,000

Average Profit =Total Profit of Last 3 Years / No of Years  = 1,20,000 / 3 = 40,000

Therefore Goodwill = Average profit   X  No of years of Purchase

= 40,000  X  2    = Rs. 80,000

Note:

(i) Abnormal Gain (Profit) should be Subtracted from the Net Profit or Net Loss.

(ii) Abnormal Loss should be Added with the Net Profit or Net Loss.

Table showing Adjusted Profit for the last 3 years.

2014      Net Profit as per P/L A/c.                                                        20,000

Less: Abnormal Gain (Insurance claims)                              (35,000)                (15,000)

2015     Net Loss as per P/L A/c.                                                        (15,000)

Add: Abnormal Loss (Retirement Compensation)                1,05,000                  90,000

2016     Net Profit as per P/L A/c.                                                         75,000

Less: Abnormal Gain (Profit on sale of Fixed Assets)           (30,000)                  45,000

Adjusted Total Profit of Last 3 Years (1,35,000 – 15,000)                             1,20,000

Average Profit =Total Profit of Last 3 Years / No of Years  = 1,20,000 / 3 = 40,000

Therefore Goodwill = Average profit   X  No of years of Purchase

= 40,000  X  2    = Rs. 80,000

Note:

(i) Abnormal Gain (Profit) should be Subtracted from the Net Profit or Net Loss.

(ii) Abnormal Loss should be Added with the Net Profit or Net Loss.

Table showing Adjusted Profit for the last 3 years.

2014               Net Profit as per P/L A/c.                                          20,000

Less: Abnormal Gain (Insurance claims)                 (35,000)                           (15,000)

2015               Net Loss as per P/L A/c.                                          (15,000)

Add: Abnormal Loss (Retirement Compensation)   1,05,000                             90,000

2016     Net Profit as per P/L A/c.                                                       75,000

Less: Abnormal Gain (Profit on sale of Fixed Assets)          (30,000)                            45,000

Adjusted Total Profit of Last 3 Years (1,35,000 – 15,000)                                           1,20,000

Average Profit =Total Profit of Last 3 Years / No of Years  = 1,20,000 / 3 = 40,000

Therefore Goodwill = Average profit   X  No of years of Purchase

= 40,000  X  2    = Rs. 80,000

Note:

(i) Abnormal Gain (Profit) should be Subtracted from the Net Profit or Net Loss.

(ii) Abnormal Loss should be Added with the Net Profit or Net Loss.

Muskan patel from Bhopal

Avg profit= Total Profit/no of years

=120000/3

=40000

Good will= Avg profit*no of years purchase

=40000*2

=80000

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