Question

19. If average profit of a firm are
rs.74000, normal rate of return is
10% goodwill is valued at
rs.1,20,000 capital employed will
be.............
​

Answer 1

Answer:

Calculation of goodwill under capitalization basis-

Capital employed = Assets - Liabilities

Capital emplyed = Rs. (1000000 - 425000)

Capital emplyed = Rs 575000

Normal value of business = Average profit/capitalization rate

Normal value of business = Rs. 120000/ 12%

Normal value of business = Rs. 1000000

Goodwill = Normal value of business - capital employed

Goodwill = Rs. 1000000 - Rs. 575000

Goodwill = Rs. 425000

Answer 2

Answer: 620000

Explanation:

Goodwill= cap. Value of average profit - cap employed .

("Cap value =avrg profit ÷ nrr")

120000= 74000×100/10 - cap empl.

Cap employed = 740000-120000

Cap employed = 620000