of return
Capital of Ramesh and Maulik's firm is
@_ 5,00,000 and expected rate
of
of
of return in 10%. Last three
years profits
are Z 70,000 1, 10,000 and 2 60,000
respectively. Compute the value of goodwill
three
years purchase of super puntat
the basis aurage profit method.
on
Answers
Answer:
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Answer:
Goodwill on three years' purchase of super profit on the basis of average profit method is ₹2,90,000.
Step-by-step explanation:
Profit of the firm for 3 Years - 1. ₹ 70,000
2. ₹ 1,10,000
3. ₹ 2,60,000
∴ Average profit of the firm in 3 years = ₹ (70,000 + 1,10,000 + 2,60,000) ÷ 3
= ₹ 1,46,666.67
Expected Profit = Capital Invested × Expected rate of return
= ₹ {5,00,000 × (10/100)}
= ₹ 50,000
Super Profit = Average Profit - Expected Profit
= ₹ (1,46,666.67 - 50000)
= ₹ 96,666.67
∴ Goodwill on three years' purchase of super profit =
Super Profit × Number of Years = ₹ (96,666.67 × 3) = ₹ 2,90,000