Question

34. Average profit of a firm during the last few years is 1,50,000. In similar business, the normal rate of
return is 10% of the capital employed. Calculate the value of goodwill by capitalisation of super profit
method if super profits of the firm are 50,000.


I know the answer but I need full solution...

Answer : GOODWILL = 500,000​

Answer 1

Answer:

Super profit =50000

Goodwill=Super profit*100/Normal rate

=50000*100/10

Goodwill=500000

Answer 2

Explanation:

• Capitalisation of super profit method :

• Average profit of a firm = 1,50,000
• The normal rate of retum is 10%
• Super Profit = 50,000

Capitalisation of super profit method :

The value of goodwill :

Super profits x (100/ Normal Rate of Return) 

=> 50,000 × 100/10

=> 5,00,000

The value of goodwill = 5,00,000

Hence, The value of goodwill = 5,00,000