Year ended | 31st March, 2019 | 31st March, 2018 | 31st March, 2017 |
Net Profit (₹) | 2,30,000 | 2,00,000 | 1,70,000 |
Calculate value of goodwill on the basis of two years’ purchase of average super profit earned during the above-mentioned three year.
Calculation For Actual Profit after Remuneration :
Year | Profit before Partners’ Remuneration | – | Partners’ Remuneration | Actual Profit after Remuneration |
2017 | 1,70,000 | – | 1,00,000 | 70,000 |
2018 | 2,00,000 | – | 1,00,000 | 1,00,000 |
2019 | 2,30,000 | – | 1,00,000 | 1,30,000 |
Normal Profit = Capital Investment x `"Normal Rate of Return"/100`
= Rs. 4,00,000 x `frac{15}{100}`
= Rs. 60,000
Calculation for Average Actual Profit Remuneration
= `frac{70,000+1,00,000+1,30,000}{3}`
= `frac{3,00,000}{3}`
= Rs. 1,00,000.
Super Profit = Average Actual Profit after Remuneration - Normal Profit
= Rs. (1,00,000 - 60,000)
= Rs. 40,000.
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