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What is the basis of property contributed to a partnership?
The basis is whatever money and tangible property you invested into the partnership. Time worked does not count as a basis. You have to keep up with the basis in order to calculate the profit or loss when the partnership is sold or divided. The basis does not have to be the selling price but is only used for tax calculations. Often a business has built up what the IRS terms Goodwill. This is their reputation, location, value of client list, etc.
How can I calculate good will of a company?
Prof. Dicksee has defined goodwill as " When a man pays for goodwill, he pays for something which places him in the position of being able to earn more than he would be able to do by his own unaided efforts." According to J. O. Magee " The capacity of a business to earn profits in future is basically what is meant by the term goodwill." According to Lord Lindley " The term goodwill is generally used to denote benefit arising from connections and reputation." Lord Eldon has defined goodwill as " Goodwill is nothing more than the probability, that the old customers will resort to the old place." In the words of Lord Macnaghten, " Goodwill is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connections of a business. It is the attractive force, which brings in customers. It is one thing which distinguishes an old established business from a new business at its first start." In the words of Dr. Canning, "Goodwill is the present value of a firm's anticipated excess earnings."Methods of Valuation of GoodwillThe following are the methods of valuation of goodwill of a firm: - ## Average Profit Method# Weighted Average Profit Method# Super Profit Method# Capitalization of Average Profit Method# Capitalization of Super Profit Method# Present Value of Super ProfitsMethod 1. Average Profit Method: Under this method goodwill is calculated on the basis of the average profit of previous years. The average profit is multiplied by the number of year's purchase. Goodwill = Average Profit x Number of Years Purchase Example: Calculate goodwill at twice the average profits of last four years' profits. The profits of the last four years were: # # Rs. 27,000 # Rs. 39,000 # Rs. 16,000 (Loss) # Rs. 40,000 Solution: Total Profit for last four years = Rs. 27,000+ Rs. 39,000-Rs. 16,000+Rs. 40,000 = Rs. 80,000 Average Profit = Rs. 80,000/4 = Rs. 20,000.Goodwill = Rs. 20,000 x 2 = Rs. 40,000.Method 2. Weighted Average Profit Method: This method is a modified version of the average profit method. Under this method the respective number of weights i.e. 1,2,3,4 multiplies profit of every year, in order to find out value product and the total of products is then divided by the total of weights in order to ascertain the weighted average profits. Goodwill = Weighted Average Profits x No. of years Purchase Weighted Average Profit = Total of Products of Profits/ Total of Weights Example: Calculate goodwill at twice the weighted average profits of last four years' profits. The profits of the last four years were:2001. Rs. 37,0002002. Rs. 29,0002003. Rs. 26,0002004. Rs. 40,000Solution:Years Profits Rs. Weight ProductRs.2001 37,000 1 37,0002002 29,000 2 58,0002003 26,000 3 78,0002004 40,000 4 160,000Total 10 333,000 Weighted Average Profit = Rs. 333,000/10 = Rs. 33,300 Goodwill = Rs. 33,300 x 2 = Rs. 66,600Method 3. Super Profit Method: When the actual profit is more than the expected profit or normal profit of a firm, it is called 'Super Profit.' Under this method goodwill is to be calculate of on the following manner: Goodwill = Super Profit x Number of Years Purchase Example: The books of a business showed that the capital employed on January 1, 2001 was Rs. 4,50,000 and the profits for the last five years were as follows: 2001-Rs. 40,000; 2002 -Rs. 50,000; 2003 - Rs. 60,000; 2004 -Rs. 70,000 and 2005 -Rs. 80,000. You are required to find out the value of goodwill, based on three years' purchase of the super profit of the business given that the normal rate of return is 10%.Solution: Total Profit of last five years = Rs. 40,000 + Rs. 50,000 + Rs. 60,000 + Rs. 70,000 + Rs. 80,000 = Rs. 300,000Average Profit = Rs. 300,000/5 =Rs. 60,000 Normal Profit = Rs. 450,000 x 10/100 = Rs. 45,000 Super Profit = Actual/Average Profit - Normal Profit Super Profit = Rs. 60,000 - Rs. 45,000 = Rs. 15,000 Goodwill = Rs. 15,000 x 3 = Rs. 45,000.Method 4. Capitalization of Average Profit Method: Under this method goodwill is difference between the total Capitalized value of the firm and the net assets of the firm. Goodwill = Capitalized Value the firm - Net Assets Capitalized Value of the firm = Average Profit x 100/ Normal Rate of Return Net Assets = Total Assets - External Liabilities Example: A firm earns Rs. 65,000 as its average profits. The usual rate of earning is 10%. The total assets of the firm amounted to Rs. 680,000 and liabilities are Rs. 180,000. Calculate the value of goodwill.Solution : Total Capitalized value of the firm = Rs. 65,000 x 100/10 = Rs. 650,000 Net Assets = Rs. 680,000 - Rs. 180,000 = Rs. 500,000 Goodwill = Total Capitalized value of the firm - Net Assets Goodwill = Rs. 650,000 - Rs. 500,000 = Rs. 150,000.Method 5. Capitalization of Super Profit Method: # # Calculate Capitalized value of the firm # Calculate required profit on capital employed by using the following formula: Normal Profit = Capital Employed x Required Rate of Return/100 # # Calculate average profit # Calculate super profit Goodwill = Super Profit x 100/Normal Rate of Return Example: Verma Brothers earn a profit of Rs. 90,000 with a capital of Rs. 4,00,000. The normal rate of return in the business is 15%. Use Capitalization of super profit method to value the goodwill. Solution: Normal Profit = Rs. 4,00,000 x 15/100 = Rs. 60,000 Super Profit = Rs. 90,000 - Rs. 60,000 = Rs. 30,000 Goodwill = Super Profit x 100/Normal Rate of Return = Rs. 30,000 x 100/15 = Rs. 200,000 Method 6. Present Value of Super Profit: Under this method, goodwill is estimated as the present value of the future super profits. The following steps are taken: # # Calculate the future super profits for next years # Choose the required rate of return # Calculate present value factors # Multiply present value factors with future super profits # The sum of product of present value factors and super profits is the value of goodwill. Example: A firm has the forecasted profits for the coming 4 years as follows:Years Profits Rs.1 80,0002 100,0003 90,0004 120,000 The total assets of the firm are Rs. 900,000 and outside liabilities are Rs. 300,000. The present value factors at 10% are as follows:Years Present Value Factor1 .92792 .80293 .70564 .6978 Calculate the Value of goodwill. Solution: Net Assets = Total Assets - Liabilities = Rs. 900,000 - Rs. 300,000 = Rs. 600,000Normal Profit = 10/100 x Rs. 600,000 = Rs. 60,000Years 1234Profits (Rs.) 80,000100,00090,000120,000Normal Profit 60,00060,00060,00060,000Super Profit 20,00040,00030,00060,000Present Value Factor .9279.8029.7056.6978Present Value of Super Profit 18,55832,11621,16841,868Goodwill = Rs. 18,558 + Rs. 32,116 + Rs. 21,168 + Rs. 41,868 = Rs. 113,710.
How do I Find the incremental profit or loss?
The incremental profit or loss is the change in profit or loss over the designated time period. After calculating the profit or loss, for example on a monthly basis, the delta between that and the average monthly profit or loss from the prior year can be determined.
What is difference between P and L statement and income and expenditure statement?
Income and expenditure account is used by not for profit companies as they are formed for not for profit basis that's why they cannot use profit and loss account.
Do goodwill get paid weekly?
Goodwill Industries typically pays its employees on a biweekly basis rather than weekly. However, pay schedules can vary by location and position, so it's best to check with the specific Goodwill organization for their payment policies. Some employees may also have options for direct deposit or pay cards, which can affect how and when they receive their wages.
What is the basis of property contributed to a partnership?
The basis is whatever money and tangible property you invested into the partnership. Time worked does not count as a basis. You have to keep up with the basis in order to calculate the profit or loss when the partnership is sold or divided. The basis does not have to be the selling price but is only used for tax calculations. Often a business has built up what the IRS terms Goodwill. This is their reputation, location, value of client list, etc.
How can I calculate good will of a company?
Prof. Dicksee has defined goodwill as " When a man pays for goodwill, he pays for something which places him in the position of being able to earn more than he would be able to do by his own unaided efforts." According to J. O. Magee " The capacity of a business to earn profits in future is basically what is meant by the term goodwill." According to Lord Lindley " The term goodwill is generally used to denote benefit arising from connections and reputation." Lord Eldon has defined goodwill as " Goodwill is nothing more than the probability, that the old customers will resort to the old place." In the words of Lord Macnaghten, " Goodwill is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connections of a business. It is the attractive force, which brings in customers. It is one thing which distinguishes an old established business from a new business at its first start." In the words of Dr. Canning, "Goodwill is the present value of a firm's anticipated excess earnings."Methods of Valuation of GoodwillThe following are the methods of valuation of goodwill of a firm: - ## Average Profit Method# Weighted Average Profit Method# Super Profit Method# Capitalization of Average Profit Method# Capitalization of Super Profit Method# Present Value of Super ProfitsMethod 1. Average Profit Method: Under this method goodwill is calculated on the basis of the average profit of previous years. The average profit is multiplied by the number of year's purchase. Goodwill = Average Profit x Number of Years Purchase Example: Calculate goodwill at twice the average profits of last four years' profits. The profits of the last four years were: # # Rs. 27,000 # Rs. 39,000 # Rs. 16,000 (Loss) # Rs. 40,000 Solution: Total Profit for last four years = Rs. 27,000+ Rs. 39,000-Rs. 16,000+Rs. 40,000 = Rs. 80,000 Average Profit = Rs. 80,000/4 = Rs. 20,000.Goodwill = Rs. 20,000 x 2 = Rs. 40,000.Method 2. Weighted Average Profit Method: This method is a modified version of the average profit method. Under this method the respective number of weights i.e. 1,2,3,4 multiplies profit of every year, in order to find out value product and the total of products is then divided by the total of weights in order to ascertain the weighted average profits. Goodwill = Weighted Average Profits x No. of years Purchase Weighted Average Profit = Total of Products of Profits/ Total of Weights Example: Calculate goodwill at twice the weighted average profits of last four years' profits. The profits of the last four years were:2001. Rs. 37,0002002. Rs. 29,0002003. Rs. 26,0002004. Rs. 40,000Solution:Years Profits Rs. Weight ProductRs.2001 37,000 1 37,0002002 29,000 2 58,0002003 26,000 3 78,0002004 40,000 4 160,000Total 10 333,000 Weighted Average Profit = Rs. 333,000/10 = Rs. 33,300 Goodwill = Rs. 33,300 x 2 = Rs. 66,600Method 3. Super Profit Method: When the actual profit is more than the expected profit or normal profit of a firm, it is called 'Super Profit.' Under this method goodwill is to be calculate of on the following manner: Goodwill = Super Profit x Number of Years Purchase Example: The books of a business showed that the capital employed on January 1, 2001 was Rs. 4,50,000 and the profits for the last five years were as follows: 2001-Rs. 40,000; 2002 -Rs. 50,000; 2003 - Rs. 60,000; 2004 -Rs. 70,000 and 2005 -Rs. 80,000. You are required to find out the value of goodwill, based on three years' purchase of the super profit of the business given that the normal rate of return is 10%.Solution: Total Profit of last five years = Rs. 40,000 + Rs. 50,000 + Rs. 60,000 + Rs. 70,000 + Rs. 80,000 = Rs. 300,000Average Profit = Rs. 300,000/5 =Rs. 60,000 Normal Profit = Rs. 450,000 x 10/100 = Rs. 45,000 Super Profit = Actual/Average Profit - Normal Profit Super Profit = Rs. 60,000 - Rs. 45,000 = Rs. 15,000 Goodwill = Rs. 15,000 x 3 = Rs. 45,000.Method 4. Capitalization of Average Profit Method: Under this method goodwill is difference between the total Capitalized value of the firm and the net assets of the firm. Goodwill = Capitalized Value the firm - Net Assets Capitalized Value of the firm = Average Profit x 100/ Normal Rate of Return Net Assets = Total Assets - External Liabilities Example: A firm earns Rs. 65,000 as its average profits. The usual rate of earning is 10%. The total assets of the firm amounted to Rs. 680,000 and liabilities are Rs. 180,000. Calculate the value of goodwill.Solution : Total Capitalized value of the firm = Rs. 65,000 x 100/10 = Rs. 650,000 Net Assets = Rs. 680,000 - Rs. 180,000 = Rs. 500,000 Goodwill = Total Capitalized value of the firm - Net Assets Goodwill = Rs. 650,000 - Rs. 500,000 = Rs. 150,000.Method 5. Capitalization of Super Profit Method: # # Calculate Capitalized value of the firm # Calculate required profit on capital employed by using the following formula: Normal Profit = Capital Employed x Required Rate of Return/100 # # Calculate average profit # Calculate super profit Goodwill = Super Profit x 100/Normal Rate of Return Example: Verma Brothers earn a profit of Rs. 90,000 with a capital of Rs. 4,00,000. The normal rate of return in the business is 15%. Use Capitalization of super profit method to value the goodwill. Solution: Normal Profit = Rs. 4,00,000 x 15/100 = Rs. 60,000 Super Profit = Rs. 90,000 - Rs. 60,000 = Rs. 30,000 Goodwill = Super Profit x 100/Normal Rate of Return = Rs. 30,000 x 100/15 = Rs. 200,000 Method 6. Present Value of Super Profit: Under this method, goodwill is estimated as the present value of the future super profits. The following steps are taken: # # Calculate the future super profits for next years # Choose the required rate of return # Calculate present value factors # Multiply present value factors with future super profits # The sum of product of present value factors and super profits is the value of goodwill. Example: A firm has the forecasted profits for the coming 4 years as follows:Years Profits Rs.1 80,0002 100,0003 90,0004 120,000 The total assets of the firm are Rs. 900,000 and outside liabilities are Rs. 300,000. The present value factors at 10% are as follows:Years Present Value Factor1 .92792 .80293 .70564 .6978 Calculate the Value of goodwill. Solution: Net Assets = Total Assets - Liabilities = Rs. 900,000 - Rs. 300,000 = Rs. 600,000Normal Profit = 10/100 x Rs. 600,000 = Rs. 60,000Years 1234Profits (Rs.) 80,000100,00090,000120,000Normal Profit 60,00060,00060,00060,000Super Profit 20,00040,00030,00060,000Present Value Factor .9279.8029.7056.6978Present Value of Super Profit 18,55832,11621,16841,868Goodwill = Rs. 18,558 + Rs. 32,116 + Rs. 21,168 + Rs. 41,868 = Rs. 113,710.
What is the hidden meaning in good will hunting?
'Good' as in looking for the better part of Will's personality .
Is commission paid on net sales or net profit?
It's not typical in any industry that pays commission. To be clear, there is a different between gross profit and gross sales. Either way, paying commission on either is not the standard.Gross profit and gross sales implies a number beforing taking out sales taxes that a company must pay.Typically, commission is paid on net profit or net sales because the "sales person" because the company has to pay the taxes and the sales person had no bearing on these taxes.Look at it this way. When tipping (which is really like paying commission) a waiter/waitress, you should tip on the amount before taxes are added not after. Taxes are a product of the state laws, etc, not the business charging the taxes. The waiter has noting to do with something the state charges.
Why profit is not regarded as the core financial objective of a firm?
in every company profit has being taken as the successful matter,'' but expenses requirement has being provided depend with the maximum profit of the company's.Due to that my considerations is that am disagree with the question!'' profit is the main objective core with in a company. because all submission of the company has being base in year depend with the shareholders wealth. by important basis are being required to them as the main speakers in evaluate financial decisions by addition profit make the higher salary due to the improvement with in graph year's to all employees with in a business handle.
What kind of company can help with debt reduction?
There are many companies which can help with debt reduction on both a for-profit and non-profit basis. You should consult a financial adviser to see which approach and program would work best for your level of debt and resources.
What kind of bussniss makes you most profit on daily basis?
investment banking
Inventories and stock are they the same?
Inventories is an abstract of all stocks meant for trading purpose in a business organization or a company and stock is part of the inventory. Trading purpose means buying and selling it on profit basis.
Is Shivkumar loans and investments company a clean company?
On what basis ?
Do pilot calculating?
Pilots calculate on a daily basis.
How do I Find the incremental profit or loss?
The incremental profit or loss is the change in profit or loss over the designated time period. After calculating the profit or loss, for example on a monthly basis, the delta between that and the average monthly profit or loss from the prior year can be determined.
How do you figure the amount of premiums paid into life insurance policy?
The premium is calculated on the basis of many factors. The insurance company will calculate the premium and inform you before you buy the policy.
