In case of negative super profits do we calculate goodwill? If yes then how?

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Solution

Dear Student,

When goodwill is calculated on the basis of super profit that means goodwill is considered on the value over & above the normal earning capacity of the firm as Super profit = $A v e r a g e p r o f i t - N o r m a l p r o f i t$

So, now when Super profit is negative that means firm is not earning over its normal earning capacity & thus there would be no goodwill to be calculated because there is nothing like negative goodwill

Regards,

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