Q.14. Capital employed in a business is Rs. 2,00,000. The normal rate of return on capital employed is 15%.

Q.14. Capital employed in a business is Rs. 2,00,000. The normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

SOLUTION

Given,

Capital employed = Rs 2,00,000

Normal rate of return = 15%

Actual profit = Rs 48,000

Super profit = Actual profit – Normal profit

= 48,000 – 30,000

=Rs 18,000

Goodwill = Super profit X Number of years purchased

= 18,000 X 3

= Rs 54,000

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