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M.450 An Aid to Accountancy—CBSE XII

(b) (i) Goodwill by Capitalisation of Super Profit Method
100 100
= Super Profit × = ` 72,000 × = ` 7,20,000.
Normal Rate of Return 10
(ii) Goodwill by Super Profit Method
= Super Profit × No. of Years’ Purchase = ` 72,000 × 3 = ` 2,16,000.
(iii) Goodwill by Capitalisation of Average Profit Method
Average Profit
Total Capitalised Value of the Firm = × 100
Normal Rate of Return
` 4,00,000
= × 100 = ` 40,00,000
10
Goodwill = Total Capitalised Value of the Firm – Net Assets
= ` 40,00,000 – ` 32,80,000 = ` 7,20,000.
Working Notes:
1. Normal Profit = Capital Employed* × Normal Rate of Return
10
= (` 40,00,000 – ` 7,20,000) × = ` 3,28,000.
100
*Capital Employed = Net Assets, i.e., Assets – External Liabilities
2. Super Profit = Average Profit – Normal Profit
= ` 4,00,000 – ` 3,28,000 = ` 72,000.
14. INCOME AND EXPENDITURE ACCOUNT
Dr. for the year ended 31st March, 2018 Cr.
Expenditure ` Income `
To Salaries 3,00,000 By Donations 10,000
To Depreciation on Furniture 10,000 By Interest on Investments 40,000
To Rent 8,500 Add: Accrued Interest 5,000 45,000
Add: Unpaid Rent 2,000 10,500 By Subscriptions 3,00,000
To Postage 11,500 Less: For 2016–17 2,000
To Honorarium to Manager 10,000 2,98,000
To Surplus 1,65,000 Less: For 2018–19 1,000
(i.e., Excess of Income over Expenditure) 2,97,000
Add: Outstanding For 2017–18 5,000 3,02,000
By Entrance Fees 1,50,000
5,07,000 5,07,000

BALANCE SHEET
as at 31st March, 2018
Liabilities ` Assets `
Subscription Received in Advance 1,000 Cash in Hand 20,000
Unpaid Rent 2,000 Cash at Bank 1,00,000
Capital Fund 2,02,000 Furniture 50,000
Add: Surplus 1,65,000 3,67,000 Less: Depreciation 10,000 40,000
Investments 2,00,000
Accrued Interest on Investments 5,000
Subscription in Arrear 5,000
3,70,000 3,70,000