Question

The capital of the firm of anuj and benu is 1000000 and the market rate of interest is 15%.Annual salary to the partners is 60000 each. The profit for last three years were 280000, 380000 and 420000. Goodwill of the firm is to be valued on the basis of two years of purchase of last three years average super profit. Calculate the goodwill of the firm

Answer 1

Answer:

Super Profit = Average Profit - Normal Profit

Average Profit = (2, 80,000 + 3,80,000 + 4,20,000) /3

Normal Profit = 10,00,000 x 15 %

Goodwill = Super Profit x No. of years of Purchase

Explanation:

Note : it is assumed that salary has already been paid to the partner..

While calculating average profit based on each profit 4 adjustment are generally made :

1. Normal income is to be added if not yet added

2. Abnormal Income is to be deducted if already added

3. Normal exprnse/loss is to be deducted if not yet deducted

4. Abnormal expense/loss is to be added back if already deducted..

Note : Net profit of each year will be considered to calculate average profit is the net profit which is carried to balance sheet as profit.