The following details are related to ABC & Co, a trading partnership entity. Find the good will using 3 years' purchase (a) average profits (b) Super profits basis. Capital employed is 600,000. Normal rate of return is 15%. 2017: 90,000; 2018: 150,000; 2019: 120,000; 2020: 180,000

The following details are related to ABC & Co, a trading partnership entity. Find the good will using 3 years' purchase (a) average profits (b) Super profits basis. Capital employed is 600,000. Normal rate of return is 15%. 2017: 90,000; 2018: 150,000; 2019: 120,000; 2020: 180,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Partnership Accounting

A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.

Partner Admission and Withdrawal

A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.

Question

The following details are related to ABC & Co, a trading partnership entity. Find the good will using 3
years' purchase (a) average profits (b) Super profits basis. Capital employed is 600,000. Normal rate
of return is 15%.
2017: 90,000; 2018: 150,000; 2019: 120,000; 2020: 180,000

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