Raja Brothers earn an average profit of 30,000 with a capital of 2,00,000. The normal rate of return in the business is 10%. Using capitalisation of super profit method, workout the value of the goodwill of the hirm (NCERT)
Answers
Answer:
Step 1: Calculation of Capital Employed:
Capital employed= Total Capital Employed
= 300000+ 200000
= 500000
Step 2: Calculation of Normal Profit:
Normal Profit= 500000 * [20/100]
= 100000
Step 3: Calculation of Average Profit:
Average Profit= 150000
Step 4: Calculation of Super Profit:
Super Profit= 150000- 100000
= 50000
Step 5: Calculation of Goodwill:
Goodwill= Super profit* [100/Normal Rate of return]
= 50000 * [100/20]
= 250000
Answer:
Value of the goodwill of the firm is Rs. 1,00,000.
Explanation:
Average Profit = 30,000
Capital = 2,00,000
The Normal Rate of Return in the business is 10%
★ Goodwill = Super Profit x (100/ Normal Rate of Return)
• Normal Profit = Capital employed x Normal Rate of Return/100
= 2,00,000 × (10/100)
= 20,000
Normal Profit = 20,000
• Super Profit = Average Profit – Normal Profit
= 30,000 - 20,000
= 10,000
Super Profit = 10,000
★ Goodwill = Super profits x (100/ Normal Rate of Return)
= 10,000 × (100/10)
= 1,00,000
Goodwill = 1,00,000
Therefore, Value of the goodwill of the firm is Rs. 1,00,000.