Question

Capitalised profit = Profit :

​

Answer 1

Answer:

Step 1: Calculate average estimated profits

Step 2: Calculate the capitalised average profits

Step 3: Calculate the value of Actual capital employed or net assets of the business

Step 4: Calculate goodwill by subtracting the actual capital employed from the capitalised average profit

Explanation:

Normal profit = Capital employed x Normal rate of return / 100

= 5,00,000 x 15 / 100

= 75000

Super profit = Average profit – Normal Profit

= 90000 – 75000

= 15000

Goodwill = Average of annual super profit x 100 / Normal Rate of return

= 15000 x 100 / 15

= 100000