Question

if business earn super profit of Rs 8000 and normal rate of return is 20%, calculate the value of goodwill by capitalisation of super profit method

Answer 1

Explanation:

Solution :

Capitalisation of super profit method :

Goodwill = Super Profit × (100/Normal Rate of Return)

Goodwill = Rs 8,000 × (100/20)

= 8,000 × (100/20)

= 40,000.

Goodwill = Rs. 40,000

Hence, the value of Goodwill = Rs. 40,000