Question

14. (Super Profit Method) X and Y have capital of 1,00,000 and 60,000
The reserve are 50,000 and creditor are 10,000
Normal rate of return expected in this type of business is 10%.
The Goodwill is valued 50,000 at two year's purchase of super profit find out average
profits.
[Ans. Value of goodwill * 46,000]​

Answer 1

Answer:

average profit=30000

Explanation:

we have to calculate A.P with the help of this formula

super profit = average profit-normal profit

goodwill=50000 and no. of year purchase

formula(goodwill=super profit * no. of year purchase)

50000=super profit*2

super profit=50000/2

super profit=25000

Now, we have to calculate normal profit

(normal profit =capital invested/reserves*normal rate of written)

normal profit = 50000*10/100

normal profit=5000

SUPER PROFIT = average profit- normal profit

average profit=super profit + normal profit

average profit = 25000+5000

=30000