The Goodwill of firm Rs 1,80,000 valued at three year's purchase of super profit. If capital employed is Rs 2,00,000 and
Normal rate of return is 10% per annum.The amount of average profit will be
Answers
Explanation:
Capital Employed = 2,00,000
Normal profit / Expected profit = 2,00,000 * 10/100
= 20,000
Super profit = Average profit — Expected profit
60,000 = Average profit — 20,000
Average profit = 80,000
Goodwill = super profit * 3
1,80,000 = SP * 3
SP = 1,80,000 / 3
SP = 60,000
So, the final answer is 80,000
& it's correct ik
Answer:
The super profit method is one method, among various methods, used to value the goodwill of a firm or business.
Goodwill is considered an intangible asset that is representative of non-physical items that play an important role in increasing the company's valuation in the market. It is usually considered in mergers and acquisitions.
The amount paid to the acquiring company in excess of the market value of the company is called goodwill.
Find:
We have find the average profit
Given:
The Goodwill of firm Rs 1,80,000 valued at three year's purchase of super profit. If capital employed is Rs 2,00,000 and Normal rate of return is 10% per annum
Explanation:
Goodwill = super profit x no. of year purchase
180000 = super profit x 3
Normal profit = capital employed x normal tere of return
normal profit =200000×10%
normal profit =20000
Super profit = average profit - normal profit
60000= Average profit - 20000
60000 + 20000 = Average profit
Average profit =80000
Hence the average profit is 80000
#SPJ3