Under which of the following methods of capitalization Goodwill = Capitalised Value of Firm(avg profit) - NET Assets(capital employed).

Capitalisation of Super Profits Method

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Capitalisation of NRR

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Capitalisation of normal Profits Method

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Capitalisation of Average Profits Method

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Solution

The correct option is D Capitalisation of Average Profits Method
Capitalised value of the firm(avg profit) = avg profit / NRR
Net Assets ( capital employed ) = Total assets - total liablilties

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Similar questions

Q. A business has earned average profit of ₹ 4,00,000 during the last few years and the normal rate of return in similar business is 10%. Find value of goodwill by:
(i) Capitalisation of Super Profit Method, and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of super profits.
Assets of the business were ₹ 40,00,000 and its external liabilities ₹ 7,20,000.

Q. Average profit of GS & Co. is ₹ 50,000 per year. Average capital employed in the business is ₹ 3,00,000. If the normal rate of return on capital employed is 10%, calculate goodwill of the firm by:
(i) Super Profit Method at three years' purchase; and
(ii) Capitalisation of Super Profit Method.

Q. Average profit of GS &Co. Rs.

50, 000

per year. Average capital employed in the business is Rs.

3, 00, 000

. If the normal rate of return on capital employed is

10

, calculate goodwill of the firm by:
(i) Super Profit Method at three years purchase and
(ii) Capitalisation of Super Profit Method.

Q. A firm earns profit of Rs

5, 00, 000

. Normal rate of Return in a similar type of business is

10

. The value of total assets (excluding goodwill) and total outsider liabilities as on the date of goodwill are Rs.

55, 00, 000

and Rs.

14, 00, 000

respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.

Under this method of calculating goodwill, we calculate the super profits and then assess the capital needed for earning such super profits on the basis of normal rate of return. This method is___

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Under which of the following methods of capitalization Goodwill = Capitalised Value of Firm(avg profit) - NET Assets(capital employed).

The correct option is D Capitalisation of Average Profits MethodCapitalised value of the firm(avg profit) = avg profit / NRRNet Assets ( capital employed ) = Total assets - total liablilties

The correct option is D Capitalisation of Average Profits Method
Capitalised value of the firm(avg profit) = avg profit / NRR
Net Assets ( capital employed ) = Total assets - total liablilties