Question

the super profits of a firm are 14000 .if the normal rate of return is 7%, calculate the amount of goodwill by super profit capitalization method​

Answer 1

Answer:

200000

Explanation:

formula of super profit of capitalisation value is super profit multiplied by hundred divided by normal rate of return

Answer 2

Amount of goodwill = 2,00,000

Explanation:

Given:

Super Profit of firm = 14,000

Normal rate of return = 7% = 7/100 = 0.07

Goodwill = ?

Computation of goodwill under capitalization method:

Amount of Goodwill = Super Profit of firm x (100 / Normal rate of return)

Amount of Goodwill = 14,000 x (100 / 7)

= 14,000 x (100 / 7)

= 2,000 x 100

Amount of goodwill = 2,00,000

Therefore Amount of Goodwill under capitalization method is 2,00,000 .

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