Question

The total capital employed in the companyis ₹800000 a reasonable rate of return is 15%and the profit of the year is 41200000. The value of goodwill of company as per the capitalisation method will be
a. 8200000
b. 1200000
c 7200000
d. 4200000​

Answer 1

Answer:

Calculation of goodwill under capitalisation basis:

Capital employed = Rs. 800000

Rate of return = 15%

Average profit = Rs. 1200000

Normal value of business = (Average profit/ Rate of return) * 100

Normal value of business = Rs. (1200000/15) * 100

Normal value of business = Rs. 8000000

Goodwill = Normal value of business - capital employed

Goodwill = Rs. (8000000 - 800000)

Goodwill = Rs. 7200000