Question

what is goodwill? give the example of capitalisation method. ​

Answer 1

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Goodwill :

Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable.

Capitalisation Method :

Capitalisation method is a method of determining the value of a firm by calculating the net present value of expected future profits or cash flows of the firm. It is used when the actual profits of the firm is less than the normal profits. It is calculated by dividing the adjusted profit by normal rate of return.

Answer 2

Answer:

Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable......

M/s Mehta and sons earn an average profit of rupees 60,000 with a capital of rupees 4,00,000. The normal rate of return is 10%. Using capitalization of super profits method calculate the value the goodwill of the firm. Ans: Goodwill = Super profits x (100/ Normal Rate of Return) = 20,000 x 100/10 = 2,00,000.

Explanation: