1.

The average profit earned by a firm is ₹ 1,00,000 which includes undervaluation of stock of ₹ 40,000 on an average basis. The capital invested in the business is ₹ 6,30,000 and the normal tare of return is 5%. Calculate goodwill of the firm on the basis of 5 time the super profit.

Answer» N:AVERAGE Profit earned by a firm = Rs. 1,00,000 Undervaluation of Stock = Rs.40,000 Average Actual Profit = Average Profit earned by a firm + Undervaluation of Stock = 1,00,000 + 40,000 = Rs. 1,40,000  Normal Profit = Capital INVESTMENT x Normal Rate of Return                        = 6,30,000 x                        = 31, 500Super Profit = Actual Average Profit - Normal Profit                    = 1,40,000 - 31, 500 = Rs.1,08, 500 GOODWILL = Super Profit x Number of Times = 1,08,500 x 5 = Rs.5,42,500


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