The books of a business showed that the capital employed on December 31, 2015, Rs. 5,00,000 and the profits for the last five years were: 2010– Rs. 40

Question

The books of a business showed that the capital employed on December 31, 2015, Rs. 5,00,000 and the profits for the last five years were: 2010– Rs. 40

The books of a business showed that the capital employed on December 31, 2015, Rs. 5,00,000 and the profits for the last five years were: 2010– Rs. 40,000: 2012-Rs. 50,000, 2013-Rs. 55,000, 2014-Rs.70,000 and 2015-Rs. 85,000. You are required to find out the value of goodwill based on 3 years purchase of the super profits of the business, given that the normal rate of return is 10%.

Monjur Alahi

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2025-01-04 04:42

1 Answers

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Salim Ahmed Kawsar · Accepted Answer · 2023-02-05T15:29:48+06:00

Normal Profits `= ("Capital Employed" xx "Normal Rate of Retrun")/(100)`
= Rs. `(5,00,000 xx 10)/(100) = Rs. 50,000`
`{:(Year,Profit(Rs)),(2011,40000),(2012,5000),(2013,55000),(2014,70000),(2015,85000),(Total,300000):}`
`{:("Average Profits",=,Rs 300000//5 = Rs.60000),("Supper Profit",=,Rs.60000-Rs.50000 = Rs. 10000),("Goodwill",=,Rs.10000 xx 3 = Rs. 30000):}`