Question

10) The average profit earned by a firms Rs.250000 which includes overvaluation of stock of
Rs10000. The capital invested in the business is Rs.1400000 and the expected rate of return is 15%.
Calculate the value of goodwill on the basis of 4 years’ purchase by super profit method.
[Ans: Rs.120000]

Answer 1

Answer:

normal profit....=capital employed *normal rate of return

1400000*15%=210000

Explanation:

super profit =avg profit ..-normal.profit

240000-210000=30000

Goodwill=super profit *no. of years purchase

30000*4=120000