Question

the business earnedaverage profit of 100000 diring the last few years .the normal rate of returns similar type of business is 10%. the asset of business were rate 1000000 and external liability was rs. 180000. calculated the value of goodwill of the firm value at 2. 1/2 years of purchase super profit​

Answer 1

Answer:

Goodwill = Rs.45000

Explanation:

Given,

Avg. profit of the firm is Rs 100000

Now, to find out super profit we need to first calculate the normal profit of the firm

So, normal profit = Capital employed*Normal rate of return/100

Capital Employed = Total Assets - Total Liabilities

Hence Capital employed = 1000000-180000

= 820000

Normal profit = 820000*10/100

= 82000

Now, Super profit = Avg profit- Normal profit

= 100000-82000 = 18000

Now to calculate g/w, we use the formula

super profit* No. of years' purchase

= 18000*2.5

= Rs. 45000( Value of Goodwill)

Hope this helped:)