Question

A company earned a profit of ? 15,00,000.
The average
average capital employed was
* 50,00,000 of company. Normal rate
of return was 15%. If goodwill is valued
on the basis of 3 years purchase of super
profit, then the value of goodwill will be:


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Answer 1

Answer:

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Step-by-step explanation:

Capitalisation method of valuing goodwill:

Under this method, value of whole business id determined by applying normal rate of return. If such value (arrived at by applying normal rate of return) is higher than the capital employed in the business, then the difference is goodwill.

Calculation of goodwill under capitalisation method is:

Goodwill = (Average profit/ Normal rate of return) - Capital employed

Goodwill = Rs. (50000/ 20%) - Rs. 150000

Goodwill = Rs. 250000 - Rs 150000

Goodwill = Rs. 100000

Answer 2

Step-by-step explanation:

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