The Total Capital of the Firm of Sakshi, Mehak and Megha is ₹ 1,00,000 and the Market Rate of Interest is 15% : - Accountancy
The total capital of the firm of Sakshi, Mehak and Megha is ₹ 1,00,000 and the market rate of interest is 15%. The net profits for the last 3 years we
The total capital of the firm of Sakshi, Mehak and Megha is ₹ 1,00,000 and the market rate of interest is 15%. The net profits for the last 3 years were ₹ 30,000; ₹ 36,000 and ₹ 42,000. Goodwill is to be valued at 2 years' purchase of the last 3 years' super profits. Calculate the goodwill of the firm.
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Average Profits = `["Total Profits"]/"Number of Years"`
= `frac\{30,000+36,000+42,000}{3}`
= Rs. 36,000
Normal Profits = Capital Employed x Normal Rate of Return
= 1,00,000 x `frac{15}{100}`
= Rs. 15,000
Super Profits = Average Profit - Normal Profit
= Rs. (36,000 - 15,000)
= Rs. 21,000
Goodwill = Super Profit x Number of Year's Purchase
= Rs. 21,000 x 2 = Rs. 42,000.
= `frac\{30,000+36,000+42,000}{3}`
= Rs. 36,000
Normal Profits = Capital Employed x Normal Rate of Return
= 1,00,000 x `frac{15}{100}`
= Rs. 15,000
Super Profits = Average Profit - Normal Profit
= Rs. (36,000 - 15,000)
= Rs. 21,000
Goodwill = Super Profit x Number of Year's Purchase
= Rs. 21,000 x 2 = Rs. 42,000.
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