Question

The company earns a net profit of ` 24,000 with a capital of ` 1,20,000. The NRR is 10%. Under
capitalisation of super profit, goodwill will be .

Answer 1

Answer:

average profit = 24,000

normal profit = capital employed × normal rate of return

= 1,20,000×10/100 = 12,000

super profit = average profit - normal profit

SUPER PROFIT = 24,000 - 12,000 = 12,000

goodwill = super profit ×100/rate of return

= 12,000×100/10 = 1,20,000