Question

Total assets of a firm are 4,20,000. The liabilities of the firm are
2,20,000. Normal rate of return in this class of business is 10%. The
firm earned a profit of 32,000. Calculate value of goodwill by
capitalisation method.​

Answer 1

Answer:

goodwill= total capitalised value of business - actual capital employed

actual capital employed= assets - liabilities

420000-220000= 200000

total capitalised value of firm = profit / normal rate of return×100

32000/10 ×100

320000

goodwill = 320000-200000 = 120000

hope you will understand