1.

Form the following particulars, calculate value of goodwill of a firm by applying Capitalisation of Average Profit Method: (i) Profits of last five consecutive years ending 31st March are: 2018 – ₹ 54,000; 2017 – ₹ 42,000; 2016 – ₹ 39,000; 2015 – ₹ 67,000 and 2014 – ₹ 59,000. (ii) Capitalisation rate 20%. (iii) Net assets of the firm ₹ 2,00,000.

Answer» N:Goodwill = Capitalised VALUE of Profit - Net Assets (CAPITAL Employed) Average Profit =                         =                         = 52,200 Capitalised Value of Profit = Profit X Rate of Return = 52,200 x                                                                                       = 2,61,000 Capitalised Value of Profit = 2,61,000 Net Assets (Capital Employed) =2, 00,000 Goodwill = Capitalised Value of Profit - Net Assets (Capital Employed) Goodwill = 2, 61, 000 - 2, 00, 000 = 61, 000


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