Question

If X and Y has capital of 1,00,000 and 60,000 . the reserves are 50,000 and creditors are 10,000. the normal rate of return is 10% on the basis of super profit .. the goodwill is valued at 50,000 .. purchase of 2 years .. find average profit ...​

Answer 1

answer

capital employed=100000+60000+50000-10000

                            =200000

NRR=10percent

normal return=NRR*CAPITAL EMPLOYED

                       10%*200000

                       =20000

GOODWILL=NO OF YRS OF PURCHASE *SUPER PROFIT

50000=2YRS*SUPER PROFIT

25000=SUPER PROFIT

AVERAGE PROFITS=SUPER PROFIT+NORMAL RETURN

                                25000+20000

                                =45000