9. The average profits expected of a firm in future are 1,36,000 per year and capital invested in the
business by the firm is 7,00,000. The rate of interest expected from capital invested in this class of
business is 12%. The remuneration of the partners is estimated to be * 16,000 for the year.
Calculate the value of goodwill on the basis of two years' purchase of super profit.
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Answer:
average profit = 1,36,000
capital = 7,00,000
normal profit = capital invested × expected rate of return
= 7,00,000×12/100 = 84,000
super profit = average profit - normal profit
= 1,36,000 - 84,000
= 52,000
goodwill = super profit × no. of year purchase
= 52,000×2 = 1,04,000
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