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Question -

A business has earned average profits of тВ╣. 1, 00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are тВ╣. 10, 00,000 and its external liabilities are тВ╣. 1, 80,000. The normal rate of return is 10%?



Answer -

Capital Employed = Assets тИТ External Liabilities
= 10, 00,000 тИТ 1, 80,000
= Rs 8, 20,000
Normal Profit = Capital Employed ├Ч┬а

= Rs 82,000
Super Profit = Actual Profit тИТ Normal Profit
= 1, 00,000 тИТ 82,000
= Rs 18,000
Goodwill = Super Profit ├Ч┬а

= Rs 1, 80,000
Alternative Method



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