A firm earns rupees 1,10,000. The normal rate of return is 10%. The assets of the firm amounted to rupees 11,00,000 and liabilities to rupees 1,00,000. Value of goodwill by capitalisation of average actual profits will be
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capitalized value = 1,10,000×100/10 = 11,00,000
net assets = 11,00,000 - 1,00,000 = 10,00,000
goodwill = 11,00,000 - 10,00,000 = 1,00,000
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