Consider the following information and calculate Goodwill by super pro

1.	Consider the following information and calculate Goodwill by super profit method. 1) Total capital employed 2) Normal Rate of Return 8% 3) Average Profit for the last 5 years Rs. 12,000 4) Remuneration to partners Rs. 3,000 5) Goodwill is estimated at 3 years purchase of super profits.
Answer» Goodwill = Super profit x No. of years of purchase. Super profit = Average profit-Normal profit Average profit = 12000-3000 (Remuneration) = 9000 Normal profit = Capital x Rate /100 = 100000×8/100 = 8000 Super profit = 9000 – 8000 = 1000 Goodwill = 1000×3 = 3000

Consider the following information and calculate Goodwill by super profit method. 1) Total capital employed 2) Normal Rate of Return 8% 3) Average Profit for the last 5 years Rs. 12,000 4) Remuneration to partners Rs. 3,000 5) Goodwill is estimated at 3 years purchase of super profits.

Answer»

Goodwill = Super profit x No. of years of purchase.

Super profit = Average profit-Normal profit

Average profit = 12000-3000 (Remuneration) = 9000

Normal profit = Capital x Rate /100 = 100000×8/100 = 8000

Super profit = 9000 – 8000 = 1000

Goodwill = 1000×3 = 3000