Question

If the average profits rs 300000,
normal rate of return is 12%. and the
amount of capital employed in rs
2200,000 then the value of goodwill
under the capitalisation method will
be?

​

Answer 1

Answer:

Value of goodwill under Capitalisation of average Profit & Capitalisation of super Profit = ₹3,00,000

Explanation:

Average Profit = ₹3,00,000

Capital Employed = ₹22,00,000

Normal rate of return = 12%

So, Value of goodwill under capitalisation of average profit =

₹3,00,000 × 100/12 - ₹22,00,000

= ₹3,00,000

Normal profit = ₹22,00,000 × 12/100

= ₹2,64,000

Super Profit = ₹3,00,000 - ₹2,64,000

= ₹36,000

So, Value of goodwill under capitalisation of super Profit =

₹36,000 × 100/12

= ₹3,00,000