Partnership and LLP AccountsQ-3 | Partnership and LLP AccountsQuestion 4859 of 108
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Mr. X gives the following particulars in respect of business carried on by him: Particulars Amount Capital Invested in business 9,00,000 Market rate of interest on investment 8% Rate of risk return on capital invested in business 3% Remuneration per annum from alternative employment of proprietor if he was not engaged in business 36,000 The business earned profits of 2,40,000, 2,16,000 and 3,00,000 in the years 2018, 2019 and 2021 respectively but made a loss of 36,000 in the year 2020. Compute the value of Goodwill on the basis of 6 years' purchase of super profits of the business, calculated on the basis of average profit of last four years. [June 2022, 5 Marks]; [MTP Jan. 2025]

Options

A
B
C
D
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Correct Answer

✅ Option — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

Calculation of Goodwill by Super Profit Method a. Calculation of Average Profit Average Profit = total profit / no. of years = 2,40,000 + 2,16,000 + 3,00,000 – 36,000 / 4 = 1,80,000 Less: Annual Remuneration = (36,000) Average Profits = 1,44,000 b. Normal Profit = Capital Invested X Rate of Return / 100 = 9,00,000 x 11 / 100 = 99,000 c. Super Profit = Average Profit- Normal Profit = 1,44,000-99,000 = 45,000 d. Goodwill = Super Profit X No. of years Purchase = 45,000 X 6 = 2,70,000

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Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

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