Question

3. Rakesh and Ashok earned profit of 5,000. They employed capital of 25,000 in the firm. It is expected
at 2 years' purchase of the last 3 years' super profit
that the normal rate of return is 15% of the capital. Calculate amount of goodwill if goodwill is valued
at three years' purchase of super profit.
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Answer 1

Answer:

average profit      5000

normal profit    =  25000 × 15/100 = 3750

super profit = average profit - normal profit

                   =  5000 -  3750

                     =   1250

goodwill = super profit × no of year purchase

               =  1250 × 3

                 = 3750