If average profit is Rs 60,000 , normal rate of return is 10% and average capital employed is
Rs 5,00,000, goodwill at 3 years’ purchase of super profits will be:
(A) Rs 10,000 (B) Rs 1,80,000 (C) Rs 1,50,000 (D) Rs 30,000
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Calculation of Goodwill by Super profit method
Goodwill = Super profit * No. purchase years
= 10000 * 2
= 20000
Super profit = Average profit - Normal Profit
= 60000 - 50000
= 10000
Normal Profit = Capital employed * Rate / 100
= 400000 * 12.5 / 100
= 50000..
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