Business Studies, asked by AfeefaAnees, 1 month ago

Profits of 3 years are 40000,50000,30000 ,No of purchase year is 4 capital is 400000 and rate of return is 30%.
a) Calculate average profit
b) Calculate normal profit
c) Calculate goodwill.​

Answers

Answered by kmeenu201986
0

Answer:

I hope it will help you

Explanation:

(i) Capitalisation of Super Profit Method:

Step 1: Calculation of Capital Employed:

Capital Employed= Assets- External Liabilities

= 4000000- 720000

= 3280000

Step 2: Calculation of Normal Profit:

Normal Profit= 3280000 * [10/100]

= 328000

Step 3: Calculation of Average Profit:

Average Profit= 400000

Step 4: Calculation of Super Profit:

Super Profit= 400000- 328000

= 72000

Step 5: Calculation of Goodwill:

Goodwill= Super Profit * [100/Normal Rate Of Return]

= 72000 * [100/10]

= 720000

(ii) Super Profit Method:

Step 1: Calculation of Capital Employed:

Capital Employed= Assets- External Liabilities

= 4000000- 720000

= 3280000

Step 2: Calculation of Normal Profit:

Normal Profit= 3280000 * [10/100]

= 328000

Step 3: Calculation of Average Profit:

Average Profit= 400000

Step 4: Calculation of Super Profit:

Super Profit= 400000- 328000

= 72000

Step 5: Calculation of Goodwill:

Goodwill= Super Profit * Number of years' of purchase

= 72000 * 3

= 216000

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