Capital employed in a business is Rs. 2,00,000. The normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

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Solution

Capital Employed = Rs 2,00,000

Actual Profit = 48,000

Normal Rate of Return = 15%

Normal Profit = Capital Employed ×

= Rs 30,000

Super profit = Actual Profit − Normal Profit

= 48,000 − 30,000

= Rs 18,000

Goodwill = Super Profit × Number of Years Purchase

= 18,000 × 3

= Rs 54,000

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Capital employed in a business is Rs. 2,00,000. The normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

Capital Employed = Rs 2,00,000 Actual Profit = 48,000 Normal Rate of Return = 15% Normal Profit = Capital Employed × = Rs 30,000 Super profit = Actual Profit − Normal Profit = 48,000 − 30,000 = Rs 18,000 Goodwill = Super Profit × Number of Years Purchase = 18,000 × 3 = Rs 54,000

Capital Employed = Rs 2,00,000

Actual Profit = 48,000

Normal Rate of Return = 15%

Normal Profit = Capital Employed ×

= Rs 30,000

Super profit = Actual Profit − Normal Profit

= 48,000 − 30,000

= Rs 18,000

Goodwill = Super Profit × Number of Years Purchase

= 18,000 × 3

= Rs 54,000