CA Foundation Exam > CA Foundation Questions > The profits and losses for the last years are...
Start Learning for Free
The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.
- a)Rs. 13,500.
- b)Rs. 13,568.
- c)Rs. 13,668.
- d)Rs. 13,868.
Correct answer is option 'D'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
The profits and losses for the last years are 2001-02 Losses Rs. 10,00...
Calculation of Super Profits:
- Super profits are calculated by subtracting the normal rate of return from the average capital employed.
- Normal rate of return = Capital Employed × Rate of Interest
- Average capital employed = Rs. 2,00,000
- Rate of interest = 12%
- Normal rate of return = 2,00,000 × 12% = Rs. 24,000
- Super profits = Average capital employed - Normal rate of return
- Super profits = 2,00,000 - 24,000 = Rs. 1,76,000
Calculation of Annuity:
- Annuity is calculated using the formula: Annuity = Super profits × (1 - (1 + r)^(-n))/r
- r = discounting rate = 10%
- n = number of years = 4
- Annuity = 1,76,000 × (1 - (1 + 10%)^(-4))/10%
- Annuity = 1,76,000 × (1 - (1 + 0.1)^(-4))/0.1
- Annuity = 1,76,000 × (1 - 1.4641)/0.1
- Annuity = 1,76,000 × (-0.4641)/0.1
- Annuity = -1,64,491
Calculation of Goodwill:
- Goodwill is calculated by multiplying the annuity by the number of years purchase.
- Number of years purchase = 4
- Goodwill = Annuity × Number of years purchase
- Goodwill = -1,64,491 × 4
- Goodwill = -6,57,964
Calculation of Average Profits:
- Average profits are calculated by taking the average of the profits and losses for the last four years.
- Average profits = (98,000 + 76,000 - 10,000 - 2,500)/4
- Average profits = 1,61,500/4
- Average profits = Rs. 40,375
Calculation of Normalized Profits:
- Normalized profits are calculated by subtracting the remuneration of partners from the average profits.
- Remuneration of partners = Rs. 1,000 per month × 12 months = Rs. 12,000
- Normalized profits = Average profits - Remuneration of partners
- Normalized profits = 40,375 - 12,000
- Normalized profits = Rs. 28,375
Calculation of Adjusted Goodwill:
- Adjusted Goodwill = Goodwill + Normalized Profits
- Adjusted Goodwill = -6,57,964 + 28,375
- Adjusted Goodwill = -6,29,589
Final Calculation of Goodwill:
- The value of Goodwill cannot be negative, so we take the absolute value.
- Goodwill = |Adjusted Goodwill|
- Goodwill = |-6,29,589|
- Goodwill = Rs. 6,29,589
Therefore, the value of Goodwill on the basis of four years purchase of super profits based on the annuity of
- Super profits are calculated by subtracting the normal rate of return from the average capital employed.
- Normal rate of return = Capital Employed × Rate of Interest
- Average capital employed = Rs. 2,00,000
- Rate of interest = 12%
- Normal rate of return = 2,00,000 × 12% = Rs. 24,000
- Super profits = Average capital employed - Normal rate of return
- Super profits = 2,00,000 - 24,000 = Rs. 1,76,000
Calculation of Annuity:
- Annuity is calculated using the formula: Annuity = Super profits × (1 - (1 + r)^(-n))/r
- r = discounting rate = 10%
- n = number of years = 4
- Annuity = 1,76,000 × (1 - (1 + 10%)^(-4))/10%
- Annuity = 1,76,000 × (1 - (1 + 0.1)^(-4))/0.1
- Annuity = 1,76,000 × (1 - 1.4641)/0.1
- Annuity = 1,76,000 × (-0.4641)/0.1
- Annuity = -1,64,491
Calculation of Goodwill:
- Goodwill is calculated by multiplying the annuity by the number of years purchase.
- Number of years purchase = 4
- Goodwill = Annuity × Number of years purchase
- Goodwill = -1,64,491 × 4
- Goodwill = -6,57,964
Calculation of Average Profits:
- Average profits are calculated by taking the average of the profits and losses for the last four years.
- Average profits = (98,000 + 76,000 - 10,000 - 2,500)/4
- Average profits = 1,61,500/4
- Average profits = Rs. 40,375
Calculation of Normalized Profits:
- Normalized profits are calculated by subtracting the remuneration of partners from the average profits.
- Remuneration of partners = Rs. 1,000 per month × 12 months = Rs. 12,000
- Normalized profits = Average profits - Remuneration of partners
- Normalized profits = 40,375 - 12,000
- Normalized profits = Rs. 28,375
Calculation of Adjusted Goodwill:
- Adjusted Goodwill = Goodwill + Normalized Profits
- Adjusted Goodwill = -6,57,964 + 28,375
- Adjusted Goodwill = -6,29,589
Final Calculation of Goodwill:
- The value of Goodwill cannot be negative, so we take the absolute value.
- Goodwill = |Adjusted Goodwill|
- Goodwill = |-6,29,589|
- Goodwill = Rs. 6,29,589
Therefore, the value of Goodwill on the basis of four years purchase of super profits based on the annuity of
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Top Courses for CA FoundationView all
The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer?
Question Description
The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer?.
The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer?.
Solutions for The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer?, a detailed solution for The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice The profits and losses for the last years are 2001-02 Losses Rs. 10,000; 2002-03 Losses Rs. 2,500; 2003-04 Profits Rs. 98,000 & 2004-05 Profits Rs. 76,000. The average capital employed in the business is Rs. 2,00,000. The rate of interest expected from capital invested is 12%. The remuneration of partners is estimated to be Rs. 1,000 per month.Calculate the value of goodwill on the basis of four years purchase of super profits based on the annuity of the four years. Take discounting rate as 10%.a)Rs. 13,500.b)Rs. 13,568.c)Rs. 13,668.d)Rs. 13,868.Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup