Question : Average profit is Rs.5,00,000. Capital employed is Rs.40,00,000. Normal rate of return is 8%. The value of goodwill on the basis of capitalisation of super profit is:
Option 1: Rs.22,50,000
Option 2: Rs.25,00,000
Option 3: Rs.32,50,000
Option 4: Rs.15,50,000
Answer (1)
20th Jan, 2024
Correct Answer: Rs.22,50,000
Solution :
Normal Profit = Capital employed X Normal rate of return = Rs.40,00,000 X 8% = Rs.3,20,000
Average Profit = Rs.5,00,000
Super Profit = Average Profit - Normal Profit = Rs.5,00,000 - Rs.3,20,000 = Rs.1,80,000
Goodwill = Super Profit X 100/Normal rate of return = Rs.1,80,000 X 100/8 = Rs.22.50,000.
Hence, the correct option is 1.
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