Question

a firm earn profits of ₹8000 ₹ 10000 ₹12000 ₹16000 in last 4 years the firm has capital investment of rupees 50000 fare rate of return on investment is 15% pa calculate Goodwill of the firm based on 3 years purchase of average profit of last 4 years

Answer 1

Given:

• The profits for the last four years were Rs 8,000, Rs 10,000, Rs 12,000 and Rs 16,000.
• The firm had a capital investment of Rs 50,000.
• The NRR [Normal Rate of Return] is 15%.

To find: The goodwill based on 3 years' purchase of the average profit of the last four years.

Answer:

The capital investment and NRR are irrelevant here since we only need the average profit and the number of years' purchase to find the goodwill.

Average proftit = Total profit ÷ Number of years

• Total profit = Rs 8,000 + Rs 10,000 + Rs 12,000 + Rs 16,000 = Rs 46,000
• Number of years = 4

Average profit = Rs 46,000 ÷ 4 = Rs 11,500

Goodwill = Average profit × Number of years' purchase

• Average profit = Rs 11,500
• Number of years' purchase = 3

Goodwill = Rs 11,500 × 3

Goodwill = 34,500

Therefore, the value of goodwill is Rs 34,500.

Answer 2

Answer:

GOODWILL=12,000

Explanation:

AVERAGE PROFIT=10,000+8000+12,000+16,000=

46000÷4=11,500

NORMAL PROFIT=50,000×15\100=7500

SUPER PROFIT=AVERAGE PROFIT - NORMAL PROFIT

=11500-7500=4000

GOODWILL= SUPER PROFIT × NO.OF YEARS' PURCHASE

=4000×3=12,000