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The firm of P,Q and R earned Rs.4,00,000 average profits during the last three years. The capital employed in the business was Rs.6,00,000. Normal rate of return of the industry is 8%. Calculate the goodwill of the firm by capitalising the super profits. |
Answer»
To FIND: The goodwill of the firm by capitalizing the super profit. Answer: The average profit has already been provided to us, i.e., Rs 4,00,000.
Normal profit = (Capital × NRR) ÷ 100 Normal profit = (Rs 6,00,000 × 8) ÷ 100 Normal profit = Rs 48,000 Super profit = Average profit = Normal profit Super profit = Rs 4,00,000 - Rs 48,000 Super profit = Rs 3,52,000 Goodwill = (Super profit × 100) ÷ NRR Goodwill = (Rs 3,52,000 × 100) ÷ 8 Goodwill = Rs 3,52,00,000 ÷ 8 Goodwill = Rs 44,00,000 Therefore, the goodwill of the firm by capitalization of super profit is Rs 44,00,000. |
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