Question

Average profit of the firm are Rs 3,00,000. Total tangible assets in the firm are Rs 28,00,000 and outside liabilites are Rs 8,00,000. In the same type of business,the normal rate of return is 10% of the capital employed.
Calculate the value of goodwill by Capitalisation of super profit method. ​

Answer 1

Answer:

hopefully this will help you

Answer 2

Answer:

The value of goodwill by Capitalization of super profit method will be ₹1000000.

Explanation:

Average Profit of the firm= ₹300000
Total tangible assets of the firm= ₹2800000
Total outside liabilities of the firm= ₹800000
Normal rate of return= 10%
∴ Net assets or capital employed = Total assets - Total liabilities
= 2800000 - 800000
= ₹2000000
Now, Normal Profit of the firm = Normal rate of return× Capital employed

= 10%×2000000

= ₹200000

Now, Super Profit of the firm= Average Profit - Normal Profit
= 300000-200000
= ₹100000

Goodwill by the capitalization of super profit= Super Profit×$\frac{100}{10}$
= 100000×$\frac{100}{10}$
= ₹1000000

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