the average net profit of a firm is ₹84000 per annum. capital invested is ₹500000. the rate pf return in such business is 12%. partners are paid 12000 for remuneration . calculate the value of goodwill by capitalisation of super profit method.
Answers
Answer
(i) Capitalisation of Super Profit Method:
Step 1: Calculation of Capital Employed:
Capital Employed= 5500000- 1400000
= 4100000
Step 2: Calculation of Normal Profit:
Normal Profit= 4100000 * [10/100]
= 410000
Step 3: Calculation of Average Profit:
Average Profit= 500000
Step 4: Calculation of Super Profit:
Super Profit= 500000- 410000
= 90000
Step 5: Calculation of Goodwill:
Goodwill= 90000 * [100/10]
= 900000
(ii) Capitalisation of Average Profit Method:
Step 1: Calculation of Capitalised value of Profit:
Capitalised value of Profit= Profit * [100/ Normal Rate of return]
= 500000 * [100/10]
= 5000000
Step 2: Calculation of Capital Employed:
Capital Employed= 5500000- 1400000
= 4100000
Step 3: Calculation of Goodwill:
Goodwill= Capitalised value of Profit- Capital Employed
= 5000000- 4100000
= 900000