A firm earned average profit of 300000 during the last few years the normal rate of return of the industry is 15% the assets of the business where 1700000 and its liabilities where two lakh calculate the Goodwill of the firm by capitalisation of average profit.
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The Goodwill of the firm = ₹ 5,00,000
Explanation:
Solution :
★ Goodwill = Capitalised Value of Average Profit - Capital Employed
• Capitalised Value of Average Profit = Average Profit × (100/NRR)
- Average Profit of 3,00,000 (Given)
• Capitalised Value of Average Profit = Average Profit × (100/NRR)
= 3,00,000 × (100/15)
= 20,00,000
Capitalised Value of Average Profit = 20,00,000
• Capital Employed =
= 17,00,000 - 2,00,000
= 15,00,000
Capital Employed = 15,00,000
★ Goodwill = Capitalised Value of Average Profit - Capital Employed
= 20,00,000 - 15,00,000
= 5,00,000
Goodwill = ₹ 5,00,000
Therefore, the Goodwill of the firm by Capitalisation of Average Profit = ₹ 5,00,000.
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