Question

As per super profit method goodwill = ____________.

• A. Actual profit multiplied by No. of years of purchase
• B. Normal profit multiplied by No. of years of purchase
• C. Maintainable profit multiplied by No. of years of purchase.
• D. Super profit multiplied by No. of years of purchase.

Answer 1

The correct option is D Super profit multiplied by No. of years of purchase.

Super profit means excess profit that can be earned by a firm over and above the normal profit usually earned by similar firms under circumstances. Formula of calculating goodwill by Super profit basis is -

Goodwill = Super profit multiplied by No. of years of purchase