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Standard XII

Accountancy

Trade Receivables Turnover Ratio

A firm has an...

Question

A firm has an average profit of Rs 60,000. Rate of return on capital employed is 12.5% p.a. Total capital employed is Rs 4,00,000. Goodwill is to be calculated on the basis of two years purchase of super profit. Find the amount of goodwill?

Rs 20,000

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Rs 15,000

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Rs 10,000

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None

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Solution

The correct option is C Rs 20,000
Calculation of Goodwill by Super profit method
Goodwill = Super profit * No. purchase years
= 10000 * 2
= 20000
Super profit = Average profit - Normal Profit
= 60000 - 50000
= 10000
Normal Profit = Capital employed * Rate / 100
= 400000 * 12.5 / 100
= 50000

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A firm has an average profit of Rs 60,000. Rate of return on capital employed is 12.5% p.a. Total capital employed is Rs 4,00,000. Goodwill is to be calculated on the basis of two years purchase of super profit. Find the amount of goodwill?

The correct option is C Rs 20,000Calculation of Goodwill by Super profit method Goodwill = Super profit * No. purchase years = 10000 * 2 = 20000Super profit = Average profit - Normal Profit = 60000 - 50000 = 10000Normal Profit = Capital employed * Rate / 100 = 400000 * 12.5 / 100 = 50000

The correct option is C Rs 20,000
Calculation of Goodwill by Super profit method
Goodwill = Super profit * No. purchase years
= 10000 * 2
= 20000
Super profit = Average profit - Normal Profit
= 60000 - 50000
= 10000
Normal Profit = Capital employed * Rate / 100
= 400000 * 12.5 / 100
= 50000