Average Profit of The Firm is ₹ 2,00,000. Total Assets of the Firm are ₹ 15,00,000 Whereas Partners' Capital is ₹ 12,00,000
Average profit of the firm is ₹ 2,00,000. Total assets of the firm are ₹ 15,00,000 whereas Partners' Capital is ₹ 12,00,000. If normal rate of return
Average profit of the firm is ₹ 2,00,000. Total assets of the firm are ₹ 15,00,000 whereas Partners' Capital is ₹ 12,00,000. If normal rate of return in a similar business is 10% of the capital employed, what is the value of goodwill by Capitalisation of Super Profit?
Goodwill = Super Profits x `"100"/Normal Rate of Return"`
= Rs. 80,000 x `100"/10`
= Rs. 8,00,000.
Working Notes:
1.
Calculation of Super Profits Average Profit = `"Total Profit for past given years"/"Number of years"`
= Rs. 2,00,000
Normal Profit = `"Capital Employed x Normal Rate of Return"/"100"`
= Rs. 12,00,000 x `"10"/100`
= Rs. 1,20,000
Super Profit = Average Profit – Normal Profit
= Rs. (2,00,000 – 1,20,000)
= Rs. 80,000.
2.
Calculation of Capital Employed
Capital Employed = Total Assets – Outside Liabilities
= Rs. (15,00,000 – 3,00,000)
= Rs. 12,00,000.
= Rs. 80,000 x `100"/10`
= Rs. 8,00,000.
Working Notes:
1.
Calculation of Super Profits Average Profit = `"Total Profit for past given years"/"Number of years"`
= Rs. 2,00,000
Normal Profit = `"Capital Employed x Normal Rate of Return"/"100"`
= Rs. 12,00,000 x `"10"/100`
= Rs. 1,20,000
Super Profit = Average Profit – Normal Profit
= Rs. (2,00,000 – 1,20,000)
= Rs. 80,000.
2.
Calculation of Capital Employed
Capital Employed = Total Assets – Outside Liabilities
= Rs. (15,00,000 – 3,00,000)
= Rs. 12,00,000.
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