capital invested in a firm is - 3, 00, 000 . normal rate of return is 10%. average profits of the firm are- 41, 000 (after an abnormal loss of -2000) . calculate goodwill at five times the super profits.
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Answer:
Value of goodwill is 55,000/-
Explanation:
Avg. profit = 41,000/- (no changes because abnormal loss already adjusted)
capital Employed ( invested)= 3,00,000
Normal Rate =10%
Normal profit = capital Employed × Normal rate(%)
= 3,00,000×10/100
= 30,000/-
Super Profit = Avg. Profit -- Normal Profit
41,000 - 30,000 = 11,000/-
Goodwill = 5 times of super Profit
= 5 × 11,000 = 55,000/-
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