Question

Q-11 Solve the numericals questions.
(5 marks)
1
=
A firm earned net profits during the last three years as:
Year
0
Profits
18,000
20,000
22,000
The capital investment of the firm is 60,000. Normal retum on the capital is 10%. Calculate
|cs value of goodwill on the basis of three years' purchase of the average super profit for the last
three years.nner
Your answer

Answer 1

Answer: Super profit = average profit - normal profit

  average profit = 18000 + 20000+ 22000/3 = 20000

 normal profit =  60000 × 10 /100= 6000

 super profit = 20000 - 6000 = 14000

  goodwill = super profit × no of year purchase

                  =  14000 ×3

                   = 42000