a firm earned average profit of 300000 during last few years normal return of businessvis 15%. assets were 1700000and liabilities were 200000.calculate goodwill by capitalisation of average profit
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Goodwill = Capitalised value of the firm - net assets
Goodwill = 20,00,000 - 15,00,000 = ₹5,00,000
where,
average profit = ₹ 3,00,000
Normal rate of return = 15%
Capitalised value of the firm = "Average profit "/"normal rate of return" xx 100 = (3,00,000) /(15) xx 100
Capitalised value of the firm = ₹20,00,000
Net Assets = Total Assets - liabilities
Net Assets = 17,00,000 - 2,00,000
= 15,00,000
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