Question

jai and mishan are partners their capital are rs. 3,00,000 and rs.2,00,000 are respectively . during the year ended 31.03.2021 the firm earned a profit of rs. 1,50,000 . assuming the normal rate of return as 20% calculate the goodwill on the basis of: 1) on the basis of 2 years purchase of super profit . 2)on the basis of capitalisation of super profit. 3)on the basis of capitalisation of average profit​

Answer 1

Answer:

Capital employed = 300000+200000= 500000

Average profit = 150000

normal rate of return = 20%

super profit = Average profit - normal profit

Normal profit = capital employed *normal rate of return

= 500000*20/100= 100000

super profit = 150000-100000= 50000

1. Goodwill on the basis of 2 year purchase of super

profit

Goodwill =super profit * no.of year purchase

= 50000*2= 100000

2. on the basis of capitalisation of super profit

Goodwill = super profit *100/ normal rate of return

= 50000*100/20= 250000

3. on the basis of capitalisation of average profit

Capitalised value of average profit = average profit *100/normal rate of return

= 150000*100/20= 750000

Goodwill = capitalised value of average profit - actual capital employed

= 750000-500000= 250000