1.
Calculate the amount of goodwill on the basis of 2 years purchase of the last five year’s
average [Link] profits for the last five years are:8,200 ; 10,500 ; 5,100 ; 7,700 ; 12,000.
2.A Company has fixed assets of Rs.2,00,000 and profit after depreciation @5% p.a. is
Rs.80,000 and the income tax limit for depreciation is Rs.8,[Link] :
a)5% of the Net Profit as commission to manager.
b)Tax Provision at 50%.
3.A Profit of Jeyaram Ltd. for the last 5 years were as follows:2004-Rs.28,000 ; 2005-
Rs.28,000 ; 2006-Rs.30,000 ; 2007-Rs.35,000 ; 2008-rs.32,000.
Compute the value of goodwill of Jeyaram [Link] the basis of 4 years purchase of
weighted average profit after assigning weights 1,2,3,4 and 5 serially to the profits.
[Link] Net profits of a company after providing for taxation for the past five years are:
Rs.78,000 ; Rs.82,000 ; Rs.88,000 ; Rs.93,000 ; and Rs.99,000.
The capital employed in the business is Rs.8,00,000 on which a reasonable rate of
return of 10% expected. It will be able to maintain its super profits for the next five
[Link] the value of the goodwill of the business on the basis of an annuity of super
profits,taking the present value of an annuity of one rupee for the five years at 10% interest as
Rs.3.78.
[Link] sheet of Nayagam company as on 31.12.2007
Liabilities Rs. Assets Rs.
20,000Equity shares 2,00,000 Goodwill Investment 2,00,000
of Rs.10 each at cost
Employee’s saving 1,50,000 Investment at 3,00,000
Fund cost(market value
Rs.2,50,000)
Employee’s 1,50,000 Stock at cost 5,00,000
Provident Fund
Creditors 6,00,000 Debtors 4,00,000
Profit and Loss a/c 3,70,000 Bank balance 70,000
14,70,000 14,70,000
The Profit for the last five years were Rs.15,000 , Rs.20,000 , Rs.25,000 , Rs.30,000 and
Rs.35,000 and the goodwill is to be valued on the basis of three years purchase of the
average annual profits for the last 5 Years.
Calculate the price of the share on the basis of Net asset value.
[Link] details are available about the business of Sagar Ltd.
i. Profits :2014-Rs.80,000;In 2015 –Rs.1,00,000; In 2016- Rs.1,20,000;
ii. Non-recurring income of Rs.8,000 is included in the profit of 2015.
iii. Profits of 2014 have been reduced by Rs.12,000 because goods were destroyed by
fire.
iv. Goods have not been insured but it is thought prudent to insure them in [Link]
insurance premium is estimated at Rs.800 per year.
v. Reasonable remuneration of the proprietor of the business is Rs.12,000 per year but it
has not been taken into account for calculation of above mentioned profits;
vi. Profits of 2016 include Rs.10,000 income on investment .Calculate goodwill on the
basis of three years purchase of the average profit of last three years.
7.A [Link] registered with an authorised capital of Rs.6,00,000 in equity shares of Rs.10
[Link] following is its Trail Balance on 31 st March 2018.
Trail Balance of ‘A’ Ltd.
Debit Balance Credi Balance
Rs. Rs.
Goodwill 25,000 -
Cash 750 -
Bank 39,900 -
Purchases 1,85,000 -
Preliminary expenses 5,000 -
Share capital - 4,00,000
12% debentures - 3,00,000
P & LA/c(Cr) - 26,250
Calls-in-arrears 7,500 -
Premises 3,00,000 -
Plant & Machinery 3,30,000 -
Interim dividend 39,250 -
Sales - 4,15,000
Stock(1.4.2017) 75,000 -
Furnitures and Fixes 7,200 -
Sundry Debtors 87,000 -
Wages 84,865 -
General Expenses 6,835 -
Freight and carriage 13,115 -
Salaries 14,500 -
Director’s fees 5,725 -
Bad Debts 2,110 -
Debunture interest paid 18,000 -
Bills Payable - 37,000
Sundry Creditors - 40,000
General reserve - 25,000
Provision for bad debts - 3,500
12,46,750 12,46,750
Prepare Statement of profit and Loss and balance sheet in proper form after making the
following adjustments:
i. Depreciate plant and machinery by 15%
ii. Write off preliminary epenses
iii. Provide for 6 months interest on debentures
iv. Leave bad and doubtful debts provision at 5% on sundry debtors.
v. Provide for income tax at 50%
vi. Stock on 31.3.2018 was Rs.95,000.
