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 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.

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. 

Chapter-3 Goodwill: Nature and Valuation-TS.Grewal

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