Question

. Net assets of a firm including fictitious assets of Rs . 5000 are Rs.85000. Net liabilities of the firm are Rs.30000.Normal rate of return is Rs.10% and the average profit of the firm is Rs. 8000.Value of goodwill as per capitalization of super profit method will be

Answer 1

Explanation:

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Answer 2

Given:

Net assets of a firm including fictitious assets of Rs5000 are Rs.85000. Net liabilities of the firm are Rs.30000.The normal rate of return is Rs.10% and the average profit of the firm is Rs8000.

To Find:

Value of goodwill as per capitalization of super profit method will be

Solution:

Capital employed=net assets(excluding fictitious assets)-net liabilities

                             =80000-30000

                             =50000

The normal rate of return=10%

net profit=capital employed*NRR

              =50000*10%

               =5000

Average profit=8000

Now,

Super profit=Average profit - Net profit

                    =8000-5000

                    =3000

Now computation of goodwill by the capitalization of super profit,

$G/W=\frac{SP*100}{NRR} \\=\frac{3000*100}{10}\\= 30000$

Hence, the value of goodwill by the super profit method is Rs30000.