Question

Capital of the firm is ` 2,00,000. Normal Rate of Return is 10% and average profit of the firm is ` 30,000. Goodwillis to be valued at three years purchase of super profits. Find value of goodwill.

Answer 1

Answer:

8,00,000

Explanation:

ANSWER

Step 1: Calculation of Capital Employed:

Capital employed= 1200000

Step 2: Calculation of Normal Profit:

Normal Profit= 1200000 * [10/100]

= 120000

Step 3: Calculation of Average Profit:

Average Profit= 200000

Step 4: Calculation of Super Profit:

Super Profit= 200000- 120000

= 80000

Step 5: Calculation of Goodwill:

Goodwill= Super profit* [100/Normal Rate of return]

= 80000 * [100/10]

= 800000

Answer 2

Question:-

Capital of the firm is  2,00,000. Normal Rate of Return is 10% and average profit of the firm is 30,000. Goodwill to be valued at three years purchase of super profits. Find value of goodwill.

To find:-

Goodwill

Solution:-

$\boxed{\sf{Super \:Profit = Average \:Profit - Normal \:Profit}}$

Normal Profit = Capital Employed × Normal Rate of Return

$\sf{=2,00,000\: x \dfrac { 10 }{ 100 } = Rs\: 20,000}$

Average Profit = Rs 30,000

Super Profit = 30,000 – 20,000 = Rs 10,000

Goodwill = Super Profit × No. of Year’s Purchase

= 10,000 x 3 = Rs 30,000