Question

the average profit of a firm is 50000 .Its assets and outside liabilities are 5,00,000 and 2,00,000 respectively. The normal rate of return is 10%. Find the value of goodwill if it is based on 2 years purchase of super profit.​

Answer 1

Step 1: Calculation of Capital Employed:
Capital employed= 1200000

Step 2: Calculation of Normal Profit:
Normal Profit= 1200000 * [10/100]
= 120000

Step 3: Calculation of Average Profit:
Average Profit= 200000

Step 4: Calculation of Super Profit:
Super Profit= 200000- 120000
= 80000

Step 5: Calculation of Goodwill:
Goodwill= Super profit* [100/Normal Rate of return]
= 80000 * [100/10]
= 800000

Answer 2

Answer:

The average profit is qr×s+10%÷200000-500000 =80000