Question

From the following information, calculate value of goodwill of the firm by applying Capitalisation Method: Total Capital of the firm ₹ 16,00,000.
Normal rate of return 10%. Profit for the year ₹ 2,00,000.

Answer 1

Solution:

Goodwill = Capitalised Value of Profit - Actual Capital

Capitalised Value of Profit =   $\frac{Profit x 100}{Normal Rate of Return}$

                                           =  $\frac{2,00,000 * 100}{10}$

                                          =20,00,000  

Total Capital =16,00,000

Goodwill = 20, 00, 000 - 16, 00, 000 = 4, 00, 000  

Answer 2

Explanation:

hope it will helpfull to you