Question

22. The Capital invested in a business is 40,000. The normal profit expected in a similar business is 10% p. a. The actual average profit of last 5 years is 8,000. Calculate the value of goodwill, it is
calculated at 3 years' purchase of Super Profit.
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Answer 1

Answer:

normal profit. == 40000×10% ==4000

super profit = 8000-4000= 4000

goodwill== 4000×3=12000