X Ltd wants to purchase the business of Y Ltd. Profit of Y Ltd for the past four
years were Rs. 35,000 Rs. 60,000, Rs. 50,000 and Rs. 55,000 respectively. You are
informed that Rent at Rs. 4000 p.a. and manager salary @ Rs. 2,000 per month
which have been charged against profit of Y Ltd. will not be paid by X Ltd.
Average capital employed by Y Ltd. was Rs. 6,00,000 and normal rate of return of
the same type of business was 10%. Calculate the value of Goodwill by
capitalization method.
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the question is no doubt tricky and logical
but here aa per capitalisation of average profit method
we get capitalised value of average profit which is 1,00,000 less than the average capital employed . hence company is in loss and as a reason it will fail to repay it's liabilities as well.
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