Question

calculate goodwill based on 2 1/2year of average super profit of last four years.profits(1)80000(2)60000 (3)100000 (4(40000.total assets are 7,00,000; liabilities are 1,00,000. Normal rate of return is 10%. please solve this question​

Answer 1

Answer:

Goodwill = Super profit * no. of purchase yr.

= 10,000* 2.5

= 25,000

Super profit = Avg profit - normal profit

=70,000 - 60,000

= 10,000

Normal profit = Capital employed * Rate/ 100

= 6,00,000 * 10 /100

= 60,000

Working note:

Avg profit = 80,000 + 60,000+1,00,000+40,000/4

= 2,80,000/4

=70,000

Capital employed = Total assets - total liabilities

= 7,00,000-1,00,000

= 6,00,000

Hope it helps u.

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Answer 2

Answer:

Rs. 25,000

Explanation:

Actual Average Profit = 80,000+60,000+1,00,000+40,000/4

= 2,80,000/4

= Rs. 70,000

Net Assets = Total Assets - Outside Liabilities = 7,00,000 - 1,00,000

= Rs. 6,00,000

Normal Rate of Return, NRR = 10%

Therefore, Normal Profits = 10% of Net Assets

= Rs. 60,000

Now, Super Profit = Actual Average Profit - Normal Profit = 70,000 - 60,000

= Rs. 10,000

No. of years purchase = 2.5 yrs

Hence, Goodwill = 2.5*10,000 = Rs. 25,000