Question

if average profit is rupees 105000 normal rate of return is 15% and net assets are rupees 340000 be the value of goodwill?

a) ₹ 300000
b) ₹ 400000
c) ₹ 600000
d) ₹ 750000​

Answer 1

The value of Good will amount is Rs 360,000  .

Explanation:

Given as :

The Average profit amount = A = Rs 105,000

The normal rate of return = R = 15%

The capital employed = C = Rs 340,000

Let The value of Good will amount = Rs G

According to question

Good will amount = $\dfrac{Average profit amount}{Normal rate of return}$  - Capital employed

i.e                       G = $\dfrac{A}{R}$ - C

Or,                      G = $\dfrac{105,000}{\dfrac{15}{100} }$    -  Rs 340,000

∴                         G = Rs 700000 - Rs 340,000

Or,                      G = Rs 360,000

So, The value of Good will amount = G = Rs 360,000

Hence, The value of Good will amount is Rs 360,000  . Answer