Question

J and k are partners in afirm. their capital are j rs 300000 and k rs 200000.during the year ended,the firm earned a profit of rs 150000.assuming that the normal rate of return is 20%.calculate the value of goodwill of the firm. by capitalisation method and super profit method if the goodwill is valued at 2 years purchase of super prõfit

Answer 1

Answer:

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Explanation:

Answer 2

A.  Capitalization Method :

Capital Employed = J's Capital + K's Capital

                               =  3,00,000 + 2,00,000

                               =  5,00,000

Capitalised Value =  $Profit = \frac{100}{Rate}$

                               = $1,50,000 = \frac{100}{20}$

                               = 7,50,000

Goodwill =  Capitalised Value - Capital Employed

                =  7,50,000 - 5,00,000

                =  2,50,000

B.  Super profit Method :

Normal Profit =  $5,00,000$ × $\frac{20}{100}$ = 1,00,000

Average Profit = 1,50,000

Super Profit = Average Profit - Normal Profit

                     =  1,50,000 - 1,00,000

                     =  50,000

Goodwill = Super Profit × Number of year purchased

                = 50,000 × 2

                =  1,00,000

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