Question

1. The average net profits expected in the future by a firm are 42,000 per year. The average capital employed
in the business by the firm is 2,00,000. The rate of interest expected from capital invested in this class
of business is 12%. The remuneration of the partner is estimated to be ₹ 8,000 per annum. Find out the
value of goodwill on the basis of two years' purchase of super profits.​

Answer 1

Answer:

Value Of Goodwill is ₹20,000

Explanation:

1. Calculation of Adjusted Average profit:

42,000 - 8,000 = 34,000

average adjusted profit = ₹34,000

2. Calculation of Normal Profit:

2,00,000 × 12% = 24,000

normal profit = ₹ 24,000

3. Calculation of Super Profit:

34,000 - 24,000 = 10,000

Super profit = ₹10,000

4. Calculation of Value of Goodwill :

10,000 × 2 = 20,000

Value of Goodwill = ₹20,000