Question

Qs.24 A firm earned net profits during the last seven years as follows:
2009: Rs. 20,000; 2010: Rs. 70,000(loss); 2011: Rs. 40,000(loss); 2012: Rs. 2,50,000; 2013: Rs.
2,70,000; 2014: Rs. 3,00,000; 2015: Rs. 3,20,000.
The capital invested in a firm is Rs. 12,00,000. Normal rate of return in the similar type of
business is 10%. Calculate the value of goodwill on the basis of 2%2 years purchase of average
super profits earned during the last seven years.
oro charing profits and losses in the ratio of 4.1 They admit C into​

Answer 1

Answer:

Step 1: Calculation of Normal profit:

Normal Profit = Capital employed*[ Normal rate of return/100]

= 400000 *[15/100]

= 60000

Step 2: Calculation of Average Profit

2016-- 170000-100000= 70000

2017-- 200000-100000= 100000

2018-- 230000-100000= 130000

Hence, Average Profit= [130000+100000+70000]/3

= 100000

Step 3: Calculation of Super Profit:

Super Profit = Average profit - Normal Profit

Super Profit= 100000-60000

= 40000

Step 4: Calculation of Goodwill:

Goodwill= 40000* 2

= 80000