Question

The books of Ram and Bharat showed that the capital employed on 31.12.2002 was Rs. 5,00,000 and the profits for the last 5 years : 2002 Rs. 40,000; 2003 Rs. 50,000; 2004 Rs. 55,000; 2005 Rs. 70,000 and 2006 Rs. 85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profits of the last 5 years assuming that the normal rate of return is 10%? ​

Answer 1

Answer:

normal profit= 5,00,000 ×10/100

                          =50,000

avg profit = 40,000 + 50,000 + 55,000 + 70,000 + 85,000

                                                         5

= 3,00,000     =60,000

         5

super profit = 60,000 - 50,000

             = 10,000

goodwill = 10,000 × 3

                = 30,000