Question

Average profit of the firm is ₹ 2,00,000. Total assets of the firm are ₹ 15,00,000 whereas Partners Capital is ₹ 12,00,000. If normal rate of return in a similar business is 10% of the capital employed, what is the value of goodwill by Capitalisation of Super Profit?

Answer 1

Answer:

its a long question beginner you could do it easly

Explanation:

normal value pf businesss = 120000×10% less capital employed

Answer 2

Solution:

Goodwill = Super Profit x $\frac{100}{Normal Rate of Return }$

Goodwill = 80, 000 x $\frac{100}{10}$ = 8, 00, 000

Working Notes:

Calculation Super Profit

Average Profit =  $\frac{Total Profit of Previous years}{No. of years Average Profit}$

                        = 2,00,000

Capital Employed

Capital employed = Total Assets - Outside liabilities Capital employed

                             = Rs.15,00,000 - Rs.3,00,000 = Rs.12,00,000  

Normal Profit  

Normal Profit = Capital Employed x $\frac{Normal Rate of Retrun}{100}$

Normal Profit = 12, 00, 000 x $\frac{10}{100}$ =  1, 20, 000  

Super Profit

Super Profit = Average Profit - Normal Profit Super Profit

                    = 2,00,000 - 1,20,000 = 80,000