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Question -

A business has earned average profits of ₹. 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 ₹. 10, 00,000 and its external liabilities are ₹. 1, 80,000. The normal rate of return is 10%?



Answer -

Capital Employed = Assets − External Liabilities
= 10, 00,000 − 1, 80,000
= Rs 8, 20,000
Normal Profit = Capital Employed × 

= Rs 82,000
Super Profit = Actual Profit − Normal Profit
= 1, 00,000 − 82,000
= Rs 18,000
Goodwill = Super Profit × 

= Rs 1, 80,000
Alternative Method



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