Average profit of the firm is 200000. Total assets of the firm are 1500000 whereas partners capital is 1200000. If normal rate of return is simklar business is 10% of the capital emploulyed what is the value of goodwill by capitalisation method ?
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Goodwill = 8,00,000
Explanation:
Given:
Average profit = 2,00,000
Total assets = 15,00,000
Partners Capital = 12,00,000
Normal rate = 10%
Computation:
Normal Profit = Capital x Normal rate of return
= 12,00,000 x 10%
= 1,20,000
Super Profit = Average Profit - normal Profit
= 2,00,000 - 1,20,000
= 80,000
Goodwill = Super profit x (100/NRR)
= 80,000 x (100/10)
= 80,000 x 10
Goodwill = 8,00,000
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