Captial employed in a business is Rs. 2,00,000. The normal rate of return on capital employed in 15%. During the year 2002, the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 yr purchase of super profit.

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Solution

Super profit = Actual profit - Normal profit

Normal profit = $2, 00, 000 \times \frac{15}{100} = 30, 000$

Super profit = 48,000 - 30,000

= 18,000

Goodwill = Super profit $\times$ Number of purchase years

Goodwill = 18000 $\times$ 3

= 54,000

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Captial employed in a business is Rs. 2,00,000. The normal rate of return on capital employed in 15%. During the year 2002, the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 yr purchase of super profit.

Super profit = Actual profit - Normal profit Normal profit = 2,00,000×15100=30,000 Super profit = 48,000 - 30,000 = 18,000 Goodwill = Super profit × Number of purchase years Goodwill = 18000 × 3 = 54,000

Super profit = Actual profit - Normal profit

Normal profit = $2, 00, 000 \times \frac{15}{100} = 30, 000$

Super profit = 48,000 - 30,000

= 18,000

Goodwill = Super profit $\times$ Number of purchase years

Goodwill = 18000 $\times$ 3

= 54,000