Agre ements.
10. Total Capital Employed in firm is Rs. 1,60,000; Normal Rate of Returns 15% and Profit for the year
2,40,000. Value of goodwill by capitalization method is
(a) Rs. 16,40,000
(b) Rs. 2,40,000
(c) Rs. 14,40,000
(d) Rs. 8,40,000
Answers
Answer:
(c) Rs. 14,40,000
Explanation:
Profit for the year 2,40,000.
Normal Rate of Returns 15%
Captlization value = Average profit / NRR
= 2,40,000 / 15%
= 16,00,000
Total Capital Employed in firm is Rs. 1,60,000
Goodwill = Captlization value - Total Capital Employed
= 16,00,000 - 1,60,000
= 14,40,000
_________________________________________________________
Average profit = 2,40,000
Normal profit = Captial employed * NRR
= 1,60,000 * 15%
= 24,000
Super profit = Average profit - Normal profit
= 2,40,000 - 24,000
= 2,16,000
Goodwill = Super profit / NRR
= 2,16,000 / 15%
= 14,40,000