A business has earned average profit of Rs. $1, 00, 000$ during the last few years. Find out the value of goodwill by capitalisation method, given that the asset of the business are Rs. $10, 00, 000$ and its external liabilities are Rs. $1, 80, 000$ . The normal rate of return is $10$ .

Open in App

Solution

Step 1: Calculation of Capital Employed:
Capital Employed= Assets- External Liabilities
= 1000000- 180000
= 820000

Step 2: Calculation of Capitalised value of Profit:
Capitalised Value of Profit= Profit * [100/rate of return]
= 100000 * [100/10]
= 1000000

Step 3: Calculation of Goodwill:
Goodwill= Capitalised value of profit- Capital employed
= 1000000-820000
= 180000

Suggest Corrections

Similar questions

A business has earned average profits of Rs. 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are Rs. 10,00,000 and its external liabilities are Rs. 1,80,000. The normal rate of return is 10%?

Q. A business has earned average profit of ₹ 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are ₹ 10,00,000 and its external liabilities are ₹ 1,80,000. The normal rate of return is 10%.

A business has earned average profits of Rs 1,00,000 during the last few years and the normal rate of return in similar business is 10%. Find out the value of goodwill by :

(i) Capitalisation of super profit method.

(ii) Super profit method if the good will is valued at 3 years' purchase of super profit.

The assets of the business were Rs 10,00,000 and its external liabilities Rs 1,80,000.

Q. A business has earned average profit of Rs.

4, 00, 000

during the last few years and the normal rate of return in similar business is

10 %

. Find value of goodwill by:
(i) Capitalisation of Super Profit Method, and
(ii) Super Profit Method if the goodwill is valued at

3

years purchase of super profits.
Assets of the business were Rs.

40, 00, 000

and its external liabilities Rs.

7, 20, 000

Q. A business has earned average profit of ₹ 4,00,000 during the last few years and the normal rate of return in similar business is 10%. Find value of goodwill by:
(i) Capitalisation of Super Profit Method, and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of super profits.
Assets of the business were ₹ 40,00,000 and its external liabilities ₹ 7,20,000.

Join BYJU'S Learning Program

A business has earned average profit of Rs.1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the asset of the business are Rs.10,00,000 and its external liabilities are Rs.1,80,000. The normal rate of return is 10.

A business has earned average profit of Rs. $1, 00, 000$ during the last few years. Find out the value of goodwill by capitalisation method, given that the asset of the business are Rs. $10, 00, 000$ and its external liabilities are Rs. $1, 80, 000$ . The normal rate of return is $10$ .