Question

Total capital employed in the firm is Rs. 800000, reasonable rate of return is 15% and profit for the year is Rs. 1200000. The value of Goodwill of the firm as per capitalisation method will be​

Answer 1

Explanation:

★ Goodwill = Super Profit × (100/Rate of Return)

• Total capital employed in the firm is Rs. 800000

• Normal Profit = Capital employed × Rate of Return

= 8,00,000 × (15/100)

= 1,20,000

Normal Profit = 1,20,000

• Super Profit = Average Profit - Normal Profit

= 12,00,000 - 120,000

= 10,80,000.

Super Profit = 10,80,000

★ Goodwill = Super Profit × (100/Rate of Return)

= 10,80,000× (100/15)

= 72,00,000

Goodwill = Rs 72,00,000

Therefore, The value of Goodwill of the firm will be Rs. 72,00,000.

Answer 2

ANSWER :

• ❖ If the Total Capital Employed in the firm is Rs. 8,00,000; Reasonable Rate of Return is 15% and Profit for the year is Rs. 12,00,000; then the value of Goodwill of the firm as per Capitalisation Method will be Rs. 72,00,000.

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SOLUTION :

❒ Given :-

• Total capital employed in the firm is Rs. 8,00,000

• Reasonable rate of return is 15%

• Profit for the year is Rs. 12,00,000.

❒ To Calculate :-

• Goodwill of the firm as per Capitalisation Method = ?

❒ Required Formula :-

• $\dag \: \: \underline{ \boxed{ \sf{ \: Total \: \: Value \: \: of \: \: the \: \: firm = \dfrac{Average \: \: Profit \times 100}{ Normal \: \: Rate \: \: of \: \: Return} \: }}}$

• $\dag \: \: \underline{ \boxed{ \sf{ \: Value \: \: of \: \: Goodwill = Total \: \: Value \: \: of \: \: the \: \: Firm - Total \: \: Capital \: \: Employed \: }}}$

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❒ Calculation :-

Here,

• Average Profit = Rs. 12,00,000

• Normal Rate of Return = 15%

Using the formula of Total Value of the Firm, we get,

• $\bigstar \: \: \tt{Total \: \: Value \: \: of \: \: the \: \: firm = \dfrac{Average \: \: Profit \times 100}{Normal \: \: Rate \: \: of \: \: Return}}$

$\longrightarrow \: \tt{Total \: \: Value \: \: of \: \: the \: \: firm = \dfrac{Rs. \: 12,00,000 \times 100}{15 \: \%}}$

$\longrightarrow \: \tt{Total \: \: Value \: \: of \: \: the \: \: firm = Rs. \: 80,000 \times 100}$

$\longrightarrow \: \tt{Total \: \: Value \: \: of \: \: the \: \: firm = Rs. \: 80,00,000}$

Now,

• Total Value of the Firm = Rs. 80,00,000

• Total Capital Employed = Rs. 8,00,000

Using the formula of Goodwill as per Capitalisation of Average Profit, we obtain,

• ✪ Value of Goodwill = Total Value of the Firm - Total Capital Employed

⇒ Value of Goodwill = Rs. 80,00,000 - Rs. 8,00,000

∴ Value of Goodwill = Rs. 72,00,000