VALUATION OF GOODWILL |Part2 |Capitalization & Weighted Average Profit Method #Commerce #Accountancy
Channel: Ideal City Academy
Date: 02/10/2020

Part 2:
Valuation of Goodwill is explained in the video by Capitalization & Weighted Average Profit Method for Class XII & B.Com students.

The question explained in the video are:

1. Varun and Kuber are partners in a business. Balance in Capital and Current Accounts on 31st March 2019 were:

Varun    Rs.5,00,000 (Capital Account) & Rs.80,000 (Current Account)

Kuber    Rs.3,50,000 (Capital Account) & Rs.20,000 (Dr.) (Current Account)

Profit of the last 5 consecutive years ending 31st March were:
2015 Rs.60,000, 2016 Loss Rs.40,000, 2017 Rs.1,30,000, 2018 Rs.2,00,000 & 2019 Rs.2,50,000.

General reserve appeared in the books at Rs.50,000.
If the normal rate of return is 10%, find the value of goodwill by Capitalisation Average Profit Method.

2. The profit of a firm for the last five years were as follows:

Year ended 31st March       Profits (Rs.)

2011                 43000
2012                 50000
2013                 52000
2014                 65000
2015                 85000

You are required to calculate the value of goodwill on the basis of 2 year's purchase of weighted average profit. The weights to be used are:
2011----1, 2012----2 ,2013----3, 
2014----4, 2015----5.

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