Following is the Balance Sheet of X Ltd. as at 31st March, 2019: PARTICULARS ₹ I. EQUITY AND LIABILITIES (1) Shareholders' Funds (a) Share Capital (60,000 Equity shares of ₹10 each) 6,00,000 (b) Reserves and Surplus: (i)

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2019
Following is the Balance Sheet of X Ltd. as at 31st March, 2019: PARTICULARS ₹ I. EQUITY AND LIABILITIES (1) Shareholders' Funds (a) Share Capital (60,000 Equity shares of ₹10 each) 6,00,000 (b) Reserves and Surplus: (i) Profit and Loss Account 50,000 (2) Current Liabilities (a) Short-term Borrowings — Bank Loan 10,000 (b) Trade Payable — Sundry Creditors 60,000 (c) Short-term Provisions: (i) Provision for taxation 1,10,000 (ii) Proposed Dividend 60,000 Total 8,90,000 II. ASSETS (1) Non-Current Assets (a) Fixed Assets — Tangible Assets 3,70,000 (2) Current Assets (a) Other Current Assets 5,20,000 Total 8,90,000 The net profit of the company after deducting working expenses but before providing for taxation were as under : 2016-17: ₹3,18,000 2017-18: ₹3,40,000 2018-19: ₹3,12,000 On 31st March, 2019 tangible fixed assets were revalued at ₹4,50,000. Sundry Debtors on the same date include ₹10,000 which is irrecoverable. Having regard to the type of business a 10% return on average capital employed is considered as reasonable. Ascertain the value of goodwill on the basis of 3 years purchase of superprofits. Depreciation on tangible fixed assets is charged @ 10% p.a. and the rate of taxation is 30%.

Answer & Explanation:

Calculation of Adjusted Average Profit after tax or Average Maintainable Profit Particulars Amount in ₹ Average Profit ₹3,18,000 + ₹3,40,000 + (₹3,12,000 - ₹10,000) / 3 3,20,000 Less: Depreciation @ 10% on Revaluation of Fixed Assets (₹4,50,000 - ₹3,70,000) (8,000) 3,12,000 Less: Income Tax @ 30% 93,600 Average Maintainable Profit 2,18,400 Calculation of Average Capital Employed Particulars Amount in ₹ Tangible Fixed Assets (Revalued) 4,50,000 Current Assets (₹5,20,000 - ₹10,000) 5,10,000 Total 9,60,000 Less: Bank Loan 10,000 Sundry Creditors 60,000 Provision for Taxation 1,10,000 (1,80,000) Closing Capital Employed 7,80,000 Less: ½ of Adjusted Average Profit after Tax (½ * ₹2,18,400) (1,09,200) Average Capital Employed 6,70,800 Calculation of Super Profit Particulars Amount in ₹ Average Maintainable Profit 2,18,400 Less: Normal Profit on average capital employed (10% of ₹6,70,800) (67,080) Super Profit 1,51,320 Goodwill (on the basis of 3 years purchase of super profit) Value of Goodwill = Super Profit * 3 years = ₹1,51,320 * 3 = ₹4,53,960/-

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