PadhaiBy Astra Cloud
Search notes and questions
Ask a doubtProgramsNoticesGPA calculatorMy studyClassroom

Tribhuvan University

BSc CSITBachelor of Science in Computer Science and Information TechnologyBCABachelor of Computer ApplicationBITBachelor of Information TechnologyBIMBachelor of Information ManagementBBABachelor of Business AdministrationBBSBachelor of Business StudiesBBMBachelor of Business ManagementBITMBachelor of Information Technology Management

Pokhara University

BE Computer (PU)Bachelor of Engineering in Computer EngineeringBBA (PU)Bachelor of Business Administration (Pokhara University)

National Examinations Board (+2)

Class 10Class 10 (SEE)+2 Science+2 Science (Class 11 and 12)+2 Management+2 Management (Class 11 and 12)+2 Humanities+2 Humanities (Class 11 and 12)
All universities and programs

Elective Advanced Financial Accounting

Advanced Financial AccountingTU Board 2080

The net profit after tax of a company for the last five years were Rs.60,000, Rs.65,000, Rs.70,000, Rs.60,000 and Rs.65,000. The capital employed of the business was Rs.600,000 on which 12% rate of…

2

The net profit after tax of a company for the last five years were Rs.60,000, Rs.65,000, Rs.70,000, Rs.60,000 and Rs.65,000. The capital employed of the business was Rs.600,000 on which 12% rate of return is expected. The valuation of goodwill should be based on three years purchase of the annual super profit. Required: Value of goodwill under super profit method

Answer

· Based on the official syllabus and past papers
Updated

Calculation of Goodwill under Super Profit Method

  1. Calculate Average Profit Total profit over 5 years = Rs. 60,000 + Rs. 65,000 + Rs. 70,000 + Rs. 60,000 + Rs. 65,000 = Rs. 320,000 Average profit = Rs. 320,000 / 5 = Rs. 64,000

  2. Calculate Normal Profit (12% of Capital Employed) Normal profit = 12% of Rs. 600,000 = Rs. 72,000

  3. Calculate Super Profit Super profit = Average profit – Normal profit = Rs. 64,000 – Rs. 72,000 = -Rs. 8,000 (Since super profit is negative, goodwill is Rs. 0.)

Final Answer: Rs. 0 (No goodwill arises as super profit is negative.)

Discussion

Loading…

More Advanced Financial Accounting questions

Define business concept of accounting.TU Board 20802What is Nepal Public Sectors Accounting Standards (NPSAS)?TU Board 20802What do you mean by GAAP?TU Board 20802What is goodwill?TU Board 20802Explain in brief about social accounting.TU Board 20802A company has 25,000 equity shares of Rs.100 each, Rs.90 paid up. The profit before tax is Rs.250,000. The company has a practice of transferring 30% of…TU Board 20802

All Advanced Financial Accounting old questions