AFA_Lec_19 - AdvancedFinancial Accounting FIN611...

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    Advanced Financial  Accounting FIN-611   Mian Ahmad Farhan  Lecture-19 Partnership
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    Admission of Partners (Issues) 1. Change of profit sharing ratio 2. Salary  3. Interest on capital
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    Methods for Goodwill Calculation  1. Average profit method 2. Super profit method 3. Market capitalization method
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    Average Profit Method  Years  Profit  1 st  year  20,000 2 nd  year  40,000 3 rd  year 50,000 4 th  year  70,000 Total  180,000 Average profit = 180,000 / 4 = Rs. 45,0000 Goodwill = 45,000 x 3 = 135,000
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    Super Profit Method
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    Super Profit Method Normal profit = 200,000 x 18% = 36,000 Super profit = Average profit – Normal profit        = 45,000 – 36,000       = 9,000 Goodwill = 9,000 x 3 = 27,000    
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    Market Capitalization Method    Amount in absolute terms    = Given information in absolute terms % of given information    x % of required amount  Goodwill = 45,000 / 18 x 100 = 250,000 = 250,000 -200,000 = 50,000 
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AFA_Lec_19 - AdvancedFinancial Accounting FIN611...

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