the Average net profits expected in the future by ABC firm are 100000per year .the average capital employed in the business by the firm is 500000.the rate of interest expected from capital invested in this class of business is 15 percent .the remuneration of the partners is estimated to be 10000 per annum .find out the value of goodwill on the basis of two years purchase of super profits?
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Answer:
$20,000
Explanation:
Goodwill = Super Profit x Number of Years Purchase
Normal Profit = Expected Capital Employed x
= 2,00,000 x
= 20,000
Actual Expected Profit = 36,000-6,000= $30,000
Super Profit = Actual Expected Profit - Normal Expected Profit
= 30,000- 20,000
= $10,000
Number of years purchase = 2
Super Profit = $10,000
Goodwill = Super Profit x Number of Years Purchase Goodwill
= 10000 x 2 = $20,000
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