Question

The firm earns Rs 55,000. The normal rate of return is 10%, asset of the firm were Rs 5,50,000 and liabilities were Rs 50,000. Value of goodwill bty capitalisation of average profit will be:​

Answer 1

$goodwill = average \: profit \: \times number \: of \: years \: purchase$

$average \: profit \: = \frac{total \: profits \: for \: past \: given \: years}{number \: of \: years}$

$= \frac{12000 + 18000 + 16000 + 14000}{4} = \frac{60000}{4}$

$= rs \: 15000$

$number \: of \: years \: purchase \: = 3$

Therefore,goodwill =

$15000 \times 3 = rs \: 45000$

Hope this will hlp u!!