Question

The goodwill of a firm is valued at $Rs.1,35,000$ at $3$ years purchase of super profit. Determine the missing values:
Average Profit $=\frac{3,60,000}{3}=Rs.1,20,000$
Normal Profit $=Rs....\times \frac{15}{100}=Rs....$
Super Profit $=$ Average Profit $-$ Normal Profit
$=Rs.1,20,000-Rs....=Rs...$
Goodwill $=$ Super Profit $\times$ No. of years Purchase.

Answer 1

Step 1: Calculation of Super Profit from Goodwill:

Super Profit= Goodwill/ No. of years' of purchase

= 135000/3

= 45000

Step 2: Calculation of normal profit from super profit:

Normal Profit= Average profit- Super Profit

= 120000- 45000

= 75000

Step 3: Calculation of capital employed from normal profit:

Capital Employed= Normal Profit/ [Rate of return/100]

= 75000 / [15/100]

= 500000