A and B were partners in a firm with capitals of 3,00,000 and 2,00,000 respectively. The normal rate of return was 20% and the capitalised value of average profits was 7,50,000. Calculate goodwill of the firm by capitalisation of average profits method.
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Explanation:
average profit = capitalised value - total capitals
= 7,50,000 - (3,00,000 + 2,00,000)
= 7,50,000 - 5,00,000
= 2,50,000
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