Valuation Shares And Goodwill
Valuation of Goodwill:
1) Hitesh and company decided to purchase a business. The profits for the last four years are:
2006-Rs.60,000
2007-Rs.75,000
2008-Rs.72,000
2009-Rs.69,000.
The business was looked after by the management. Remuneration from alternative employment if not engaged on the business comes to Rs.9000 p.a. Find the amount of goodwill, if it is valued on the basis of 3 years purchase of the average net profit for the last four years.
2) Following particulars are available in respect of the business carried on by X Ltd.
(a) Profits earned by X Ltd: 2007- Rs.50,000; 2008 -Rs.48,000; and 2009-Rs.52,000.
(b) Profits of 2008 is reduced by Rs.5000 due to stock destroyed by fire and profits of 2007 included a non-recurring income of Rs.3000.
(c) Profits of 2009 include Rs.2000 income on investment.
(d) The stock is not insured and it is thought prudent to insure the stock in future. The insurance premium is estimated at Rs.500 p.a.
(e) Fair remuneration to the proprietor [not taken in the calculation of profits] is Rs.10,000 p.a.
You are required to compute the value of goodwill on the basis of 2 years purchase of average profits of the last three years.
3) The following is the Balance sheet of the Excellent Traders, a concern owned by Rama as at 30th April, 2009: Balance Sheet
LIABILITIES
AMOUNT
ASSETS
AMOUNT
Creditors
Capital
Reserve
76,080
3,28,000
80,000
4,84,080
Fixed assets
Currents assets
Investment in Shares
1,80,000
2,44,080 60,000
4,84,080
The following net profits were earned which included a fixed income from investments of Rs.4,000 per annum. Rs.
Year ended 30th April, 2006 64,000
Year ended 30th April, 2007 72,000
Year ended 30th April, 2008 86,000
Year ended 30th April, 2009 90,000
Standard rate of return on capital employed in such type of business is 8%.
Compute the amount of goodwill of the above business at three years purchase of the average super profits for four
1) Hitesh and company decided to purchase a business. The profits for the last four years are:
2006-Rs.60,000
2007-Rs.75,000
2008-Rs.72,000
2009-Rs.69,000.
The business was looked after by the management. Remuneration from alternative employment if not engaged on the business comes to Rs.9000 p.a. Find the amount of goodwill, if it is valued on the basis of 3 years purchase of the average net profit for the last four years.
2) Following particulars are available in respect of the business carried on by X Ltd.
(a) Profits earned by X Ltd: 2007- Rs.50,000; 2008 -Rs.48,000; and 2009-Rs.52,000.
(b) Profits of 2008 is reduced by Rs.5000 due to stock destroyed by fire and profits of 2007 included a non-recurring income of Rs.3000.
(c) Profits of 2009 include Rs.2000 income on investment.
(d) The stock is not insured and it is thought prudent to insure the stock in future. The insurance premium is estimated at Rs.500 p.a.
(e) Fair remuneration to the proprietor [not taken in the calculation of profits] is Rs.10,000 p.a.
You are required to compute the value of goodwill on the basis of 2 years purchase of average profits of the last three years.
3) The following is the Balance sheet of the Excellent Traders, a concern owned by Rama as at 30th April, 2009: Balance Sheet
LIABILITIES
AMOUNT
ASSETS
AMOUNT
Creditors
Capital
Reserve
76,080
3,28,000
80,000
4,84,080
Fixed assets
Currents assets
Investment in Shares
1,80,000
2,44,080 60,000
4,84,080
The following net profits were earned which included a fixed income from investments of Rs.4,000 per annum. Rs.
Year ended 30th April, 2006 64,000
Year ended 30th April, 2007 72,000
Year ended 30th April, 2008 86,000
Year ended 30th April, 2009 90,000
Standard rate of return on capital employed in such type of business is 8%.
Compute the amount of goodwill of the above business at three years purchase of the average super profits for four