Which of the following method calculates the value of goodwill by capitalising the super profit on the basis of normal rate of return?

Super Profits Method

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Average Profits Method

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Capitalisation of Super Profits Method

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Capitalisation of Average Profits Method

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Solution

The correct option is C
Capitalisation of Super Profits Method

The method is called Capitalisation of Super Profits Method

ie. Goodwill = Super Profits / Normal Rate of Return

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Similar questions

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___

Under which method, goodwill is calculated by dividing super profits with normal rate of return

Q. From the following information, calculate value of goodwill of the firm by applying Capitalisation Method: Total Capital of the firm ₹ 16,00,000.
Normal rate of return 10%. Profit for the year ₹ 2,00,000.

Q. Give the formula for calculation Goodwill by 'Capitalisation of Super Profit Method'.

Q. A firm earns profit of ₹ 5,00,000. Normal Rate of Return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders' liabilities as on the date of goodwill are ₹ 55,00,000 and ₹ 14,00,000 respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation of Average Profit Method.

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Which of the following method calculates the value of goodwill by capitalising the super profit on the basis of normal rate of return?

The correct option is C Capitalisation of Super Profits Method The method is called Capitalisation of Super Profits Method ie. Goodwill = Super Profits / Normal Rate of Return

The correct option is C
Capitalisation of Super Profits Method

The method is called Capitalisation of Super Profits Method

ie. Goodwill = Super Profits / Normal Rate of Return