Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs. 3.00,000;
Rajani Rs. 2,00.000. During the year 2015 the firm earned a profit of Rs.1.50,000. Calculate the value of goodwill of the firm assuming that the normal
rate of return is 20%?
(Ans : Rs. 2,50.000)
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
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Explanation:
Solution :
★ Goodwill = Super Profit × (100/Normal Rate of Return)
• Capital Employed = Rajan's Capital + Rajani's Capital
= 3.00,000 + 2,00.000
= 5,00,000
Capital Employed = Rs. 5,00,000
• Normal Profit = Capital Employed × (Normal Rate of Return/100)
= 5,00,000 × (20/100)
= 1,00,000
Normal Profit = Rs. 1,00,000
• Super Profit = Average Profit - Normal Profit
= 1.50,000 - 1,00,000
= 50,000
Super Profit = Rs. 50,000
★ Goodwill = Super Profit × (100/Normal Rate of Return)
= 50,000 × (100/20)
= 2,50,000
Goodwill = Rs. 2,50,000
Therefore, the value of Goodwill of the firm will be Rs. 2,50,000