[ISC] Q. 36 Solution of Goodwill TS Grewal ISC 2023-24 Edition

From the following information, calculate the value of goodwill of M/s Shiv & Shahid:

1. (i) At three years’ purchase of Average Profit.
2. (ii) At three years’ purchase of Super Profit.
3. (iii) On the basis of Capitalisation of Super Profit.
4. (iv) On the basis of Capitalisation of Average Profit.

Information:

1. (a) Average capital employed in the business—₹ 7,50,000.
2. (b) Net Trading results of the firm for the past years: Profit for 2020–21—₹ 2,25,000; Loss for 2021–22—₹ 1,87,500; Profit 2022–23—₹ 6,37,500.
3. (c) Rate of return expected from capital having regard to the risk involved—15%.
4. (d) Remuneration to each partner for his service treated as a charge on profits—₹ 3,750 per month.
5. (e) Assets (excluding goodwill)—₹ 9,00,000; Liabilities—₹ 75,000.