Rajan and Rajani are partners in firm. Their capital were Rajan Rs. $3, 00, 00$ , Rajani Rs. $2, 00, 00$ . During the year 2017-18, the firm earned a profit of Rs. $1, 50, 000$ . Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is $20$ .

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Solution

Step 1: Calculation of Capital Employed:
Capital employed= Total Capital Employed
= 300000+ 200000
= 500000

Step 2: Calculation of Normal Profit:
Normal Profit= 500000 * [20/100]
= 100000

Step 3: Calculation of Average Profit:
Average Profit= 150000

Step 4: Calculation of Super Profit:
Super Profit= 150000- 100000
= 50000

Step 5: Calculation of Goodwill:
Goodwill= Super profit* [100/Normal Rate of return]
= 50000 * [100/20]
= 250000

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Rajan and Rajani are partners in firm. Their capital were Rajan Rs.3,00,00, Rajani Rs.2,00,00. During the year 2017-18, the firm earned a profit of Rs.1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20.