Question

Average profit of the firm is 600000
total tangible assets are 28 lacks and outsiders liabilities are 800000. in the same type of business the normal
rate of return is 20% of the capital
employed. calculate the value of
goodwill by capitalisation of super
profit
method.​

Answer 1

Explanation:

Goodwill = Super Profit × (100/NRR)

• Capital Employed = Total Assets - Outside Liabilities

= 28,00,000 - 8,00,000

= 20,00,000

Capital Employed = 20,00,000

• Normal Profit = Capital Employed × (Normal Rate of Return / 100)

= 20,00,000 × (20/100)

= 4,00,000

Normal Profit = 4,00,000

• Super Profit = Average Profit - Normal Profit

= 6,00,000 - 4,00,000

= 2,00,000

Super Profit = 2,00,000

Goodwill = Super Profit × (100/NRR)

= 2,00,000 × (100/20)

= 10,00,000

Goodwill = Rs. 10,00,000

Therefore, the value of

Goodwill = Rs. 10,00,000.

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