12.

65  Tulsian’s Corporate Accounting

Given below are the extracts from the Balance Sheet of Rajasthali Ltd. as at 31st March, 2023:

Particulars ` 
Equity Share Capital (Shares of ` 10 each) 4,40,000
15% Preference Share Capital (Shares of ` 100 each) 96,000
General Reserve 50,000
Profit & Loss A/c 1,82,340
Long–term Borrowings 1,00,000
Short–term Borrowings 88,960
Goodwill 90,000
Property,Plant & Equipment 2,10,000
Patents & Trade Marks 2,00,000
10% Investments: [Face Value ` 80,000] 1,00,000
Current Assets 3,57,300
Additional Information (Ignore tax) :
(a) Net Profit for the year 2022–2023 ` 4,40,000.
(b) Expected Normal Rate of Return is 10% on Closing Capital Employed.
(c) Of the Investments 10% is trade and the balance non–trade. All trade Investments are to
be valued at 10% below cost.Disputed Bonus claim of ` 29,000 not yet provided in the
accounts for 2022–2023 is settled at ` 19,000.
(d) On 01.04.2022, new machines costing ` 1,00,000 were purchased but wrongly charged to
revenue. New Machines and other Property,Plant & Equipment are subject to Depreciation
@ 10% (No rectification has yet been made). 50% of Total Property,Plant & Equipment are
found undervalued by 50% of market value and 50% of the remaining are found overvalued
by 50% of market value.
(e) With effect from 01.04.2023 the Managing Director’s remuneration will be ` 14,17,966
instead of ` 12,00,000.
Required: Calculate the Value of Goodwill (a) at 3 years’ purchase of Future Maintainable
Profits (b) at 3 years’ purchase of Super Profit (c) as per Annuity Method (Annuity Factor @ 10%
for 3 years is 2.486) (d) as per Capitalization of Super Profit Method. (e) as per Capitalisation
of Future Maintainable Profit Method. (f) If it is considered reasonable to increase the Value of
Goodwill by an amount equal to average of the book value and a valuation made at 3 years’
purchase of Average Super Profit.