Question

Hint
Q. 10. A firm earned profits of 80,000, 1,00,000, 1,20,000 and 1,80,000
during 2010-11, 2011-12, 2012-13 and 2013-14 respectively. The firm has capital
investment of 5,00,000. A fair rate of return on investment is 15% p.a. Calculate
goodwill of the firm based on three years' purchase of average super profits of last four years.​

Answer 1

Explanation:

firm earned profits. : (4 years) in ₹

80,000 --2010-11

1,00,000 --2011-12

1,20,000--2012-13

1,80,000--2013-14

Average profit = sum of profit given /no. of years

= 80,000 +1,00,000 + 1,20,000 + 1,80,000 / 4

Average profit = 1,20,000

Normal Profit = capital × rate of return on investment/100

= 5,00,000 × 15/100

Normal Profit = 75,000

Super Profit = average Profit - normal profit

= 1,20,000 - 75,000

Super Profit = 45,000

Goodwill = super Profit × no. of years Purchases

= 45,000 × 3

Goodwill = 1,35,000

∴ Goodwill = 1,35,000

Answer 2

Answer:

Goodwill of the firm = Rs. 1,35,000

Explanation:

Given:

Profit of firm :

The Profit for the last four years of a firm :

Year ------ profit (Rs.)

2010-11 ----- 80,000

2011-12 ----1,00,000

2012-13 ---1,20,000

2013-14 ---1,80,000

To find :

Calculate Goodwill of the firm

Solution :

Goodwill = Super Profit × number of year purchased

★ Average Profit =

$\sf{\longrightarrow{\dfrac{Total \: Profits \: for \: past \: Given \: years}{Number \: of \: years}}}$

$\sf{\longrightarrow{\dfrac{80,000 \: + \:1,00,000 \: + \: 1,20,000 \: + \:1,80,000 }{4}}}$

Average Profit = 1,20,000

__________________

Normal Profit = Capital Employed × Rate of return / 100

Normal Profit = 5,00,000 × 15 / 100

Normal Profit = 75,000

__________________

Super Profit = Average profit - Normal Profit

Super Profit = 1,20,000 - 75,000

Super Profit = 45,000

__________________

Goodwill = Super Profit × Number of year purchased

Goodwill = 45,000 × 3

Goodwill = 1,35,000

∴ Goodwill of the firm = Rs. 1,35,000