super profit. (Answer: Super profit: ` , ; Goodwill: ` , ) Annuity method . From the following information, calculate the value of goodwill under annuity method: (i) Average profit ` , (ii) Normal Profit ` , (iii) Normal rate of return % (iv) Years of purchase of goodwill Present value of ` for years at % per annum as per the annuity table is . (Answer: Super profit: ` , ; Goodwill: ` , ) Capitalisation of super profit method .
Find out the value of goodwill by capitalising super profits: (a) Normal Rate of Return % (b) Profits for the last four years are ` , , ` , , ` , and ` , . (c) A non-recurring income of ` , is included in the above mentioned profit of ` , . (d) Average capital employed is ` , , . (Answer: Average profit: ` , ; Super profit: ` , ; Goodwill: ` , , ) Capitalisation method .
From the following information, find out the value of goodwill by capitalisation method: (i) Average profit ` , (ii) Normal rate of return % (iii) Capital employed ` , , (Answer: Total capitalised value: ` , , ; Goodwill: ` , ) Priya, Praveen and Pooja started a partnership business of buying and selling of home appliances. They have a partnership agreement. The shop is located in a prime area where there are many potential customers. The employees are trained well and motivated.
The partners have good managerial skills. As a result, the customers’ needs are met efficiently. The customers are happy with the after sale service too. In a very short period of time the firm gained popularity and strong customer base.
After two years, the partners decide that the business is worth more than its net assets. So, they value goodwill and want to record it in the books. Discuss the following: ( ) Identify the factors that are affecting the valuation of goodwill in this business. ( ) Name the methods for the valuation of goodwill.
( ) Do you agree with the partners’ decision of recording the goodwill in the