Question

The average net profit expected of the firm in future are Rs 68000 per year and capital invested in the business by the firm in Rs 350000 the rate of interest expected from capital invested in the class of business is 12 percent the remuneration of partner is estimated is to be Rs 8000 for the year you are required. Find out the value of goodwill on the basis of two years purchase of super profit

​

Answer 1

Answer:

average profit is 60000(68000-8000)

capital employed is 350000

rate of interest is 12%

.....

normal profit is 12% of 350000 that is 42000

super profit is 60000 - 42000= 18000

Goodwill = super profit* number of Purchase year

18000*2= 36000

Answer 2

Answer:

Therefore, the value of goodwill on the basis of two years purchase of super profit is $36000$.

Explanation:

The solution is as below:

The average net profit expected of the firm in future per year are $=$ Rs $68000$

The remuneration of partner is estimated for the year$= 8000$

The capital invested in the business by the firm in Rs $=350000$

Average profit $= 68000-$remuneration

$=68000-8000\\=60000$

Capital employed $=350000$

Rate of interest $= 12$%

Normal profit= capital $*$ normal rate of return$/100$

Normal profit is $12$% of $350000$

$=350000*\frac{12}{100}\\ =42000$

Super profit $=$ Average profit $-$ normal profit

$=60000 - 42000\\= 18000$

Goodwill $=$ super profit $*$ number of Purchase year

$=18000*2\\= 36000$

Therefore, the value of goodwill on the basis of two years purchase of super profit is $36000$.

#SPJ2