Question

From the following information calculate value of goodwill of M/s. Amit and Sumit:
0 At three years' purchase of Average Profit
(ii) At the two years' purchase of Super Profit
(th) On the basis of Capitalisation of Super Profit
(iv) On the basis of Capitalisation of Average Profit.
Information:
(a) Average Capital Employed -- 6,00,000.
(b) Net Profit/Loss of the firm for the past three years: 2016 -2,00,000 (Profit); 2017 - 1,00,000
(Loss): 2018-2,30,000 (Profit).
(c) Normal Rate of Return on capital is 12%.
(d) Remuneration of each partner 30,000 per annum to be considered as a charge against
profit.
(e) Assets -6,50,000; Partners' Capital - 6,00,000.​

Answer 1

Explanation:

M/s. Amit and Sumit: 0 At three years' purchase of Average Profit (ii) At the two years' purchase of Super Profit ... (iv) On the basis of Capitalisation of Average Profit.