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  • 03 June 21 Doubts Goodwill

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    Op Boy
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    This document contains calculations of goodwill for multiple companies using different methods like simple average, weighted average, and sacrifice theory. In one example, the document calculates the gain/sacrifice for three partners, Mahesh, Naresh and Om, when their old and new profit sharing ratios changed. It finds that Mahesh sacrificed, Naresh had no gain or sacrifice, and Om gained. In another, it calculates the weighted average profits for five years to determine goodwill of Rs. 366,000 by multiplying the average profit by three years of purchase. Overall, the document demonstrates various approaches to computing goodwill based on historical financial information of companies.

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    Goodwill doubts

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    03 june 21 Doubts Goodwill

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    This document contains calculations of goodwill for multiple companies using different methods like simple average, weighted average, and sacrifice theory. In one example, the document calculates the gain/sacrifice for three partners, Mahesh, Naresh and Om, when their old and new profit sharing ratios changed. It finds that Mahesh sacrificed, Naresh had no gain or sacrifice, and Om gained. In another, it calculates the weighted average profits for five years to determine goodwill of Rs. 366,000 by multiplying the average profit by three years of purchase. Overall, the document demonstrates various approaches to computing goodwill based on historical financial information of companies.

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    © All Rights Reserved
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    15 views3 pages

    03 June 21 Doubts Goodwill

    Uploaded by

    Op Boy
    This document contains calculations of goodwill for multiple companies using different methods like simple average, weighted average, and sacrifice theory. In one example, the document calculates the gain/sacrifice for three partners, Mahesh, Naresh and Om, when their old and new profit sharing ratios changed. It finds that Mahesh sacrificed, Naresh had no gain or sacrifice, and Om gained. In another, it calculates the weighted average profits for five years to determine goodwill of Rs. 366,000 by multiplying the average profit by three years of purchase. Overall, the document demonstrates various approaches to computing goodwill based on historical financial information of companies.

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    © All Rights Reserved
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    of 3

    Q 2b CBSE

    Mahesh Naresh Om
    Old PSR 2: 3: 4

    New PSR 1: 2: 3
    Lets take
    GAIN SHARE = NEW SHARE - OLD SHARE

    Mahesh Gain = 1/6 - 2/9 (3-4)/18 -1/18 i.e Sacrifice

    NARESH Gain = 2/6 - 3/9 (6-6)/18 N


    0 o gain no sacrifice

    OM Gain = 3/6 - 4/9 (9-8)/18 1/18

    Q 2a CBSE
    A B C
    Old PSR 4 3 1

    New PSR 5 4 3

    GAIN SHARE = NEW SHARE - OLD SHARE

    A's Gain = 5/12 - 4/8 =-2/24 Sacrifice

    B's Gain = 4/12 - 3/8 =-1/24 Sacrifice

    C's Gain = 3/12 - 1/8 = 3/24

    Q2 ISC or Q 4 in CBSE Calculation of Good will


    31.03.16 31.03.17 31.03.18 31.3.19
    Yearly profits given in question 100000 -150000 150000 200000
    Add: Loss of stock by fire (Abnormal Loss) 50000
    Add: Compensation voluntry retirement (Abnormal Loss) 80000
    Add: Loss due to destruction of mac (Abnormal) 60000
    Add: Reversal of travelling exp - wrongly entered 80000 (40000*2= 80000)
    Less: Depreciation on Rs 80000 @ 10% SLM -6000 -8000
    (yearly dep 8000 ) (8000 * 9/12) Full Yr
    Correct Regular profits for G.W calculation => 150000 -10000 224000 192000

    Avg Profit (Simple) = 150000-10000+224000+192000 556000 => 139000


    4 4
    Good will = 100 % of Average profit
    100% * 139000 == 139000

    Q3 ISC or Q5 of CBSE
    2013 130000
    2014 120000
    2015 150000
    2016 110000
    2017 200000
    Average profit (Last 5 Years) = (130000+120000+150000+110000+200000) 710000 142000
    5 5

    Average profit (Last 4 Years) = (120000+150000+110000+200000) 580000 145000 higher


    4 4

    Good will = 3 nos * avg profit


    3*145000
    435000

    Q4 ISC or Q6 CBSE Calculation of Good will


    31.03.13 31.03.14 31.03.15 31.3.16 31.3.2017
    Yearly profits given in question 60000 150000 -20000 200000 185000
    Add: Reversal of Office exp - wrongly entered 40000
    Less: Depreciation on Rs 40000 @ 25% -5000
    (yearly dep 10000 ) 10000*6/12
    Correct Regular profits for G.W calculation => 60000 150000 -20000 200000 220000

    Avg Profit (Simple) = (60000 + 150000 -20000 +200000 +220000) 610000 => 122000
    5 5
    Goodwill => 3*122000 366000

    Q6 ISC or Q 8 CBSE IST 2nd 3rd


    Profits given to us in the question 40000 50000 60000
    (-) Non Recurring Income Reversal -1000
    (+) Loss by Fire Reversal 6000
    (-) Insurance Exp for Future -400 -400 -400
    (-) remuneration to proprietor -6000 -6000 -6000
    (-) Non Business Income (On Investment) Reversal -5000
    Yearly profits 39600 42600 48600

    Year Profits Weights Product


    Ist 39600 1 39600
    2nd 42600 2 85200
    3rd 48600 3 145800
    6 270600

    Avg Profit (Weighted) = Sum of Product / Sum of weights 270600/6 45100

    G.W = Nos of Year Purchase * Avg Proft (weighted) 2*45100 90200

    Q7 ISC or Q9 CBSE 2015 2016 2017 2018 2019


    Yearly profits Given 80000 105000 -20000 180000 200000
    + Abnormal loss (Reversed) 41500
    - Abnormal Gain (Reversed) -40000
    - Overvaluation of closing stock 31.03.15 -40000 Credit of trading (income side ) Closing Stock Reduce =Profit will also reduce
    +Overvaluation of opening st 01.04.2016 40000 Debit of Trading (Exp treat) Opening Stock Reduce =Profit will increase
    - Repair expense - Now Recoreded -60000
    + Depreciation wrongly charge (Reversed)
    For Yr ended 31.3.18- 60000*20%*9/12 Ist July to 31st march 9000
    For Yr ended 31.3.19- Org Cost 60000 - Dep 9000= WDV 51000*20% 10200
    Correct profit for G.W Calculation 40000 186500 -60000 129000 210200
    Weights Product
    2015 40000 1 40000
    2016 186500 2 373000
    2017 -60000 3 -180000
    2018 129000 4 516000
    2019 210200 5 1051000
    15 1800000
    Average Profit (Weighted ) = sum of product / sum of weights =1800000/15 120000
    Goodwill = Nos of Yr Purchase * Avg Profit (weighted) = 3*120000 = 360000

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