Question : The net assets of the firm including fictitious assets of Rs.5,000 are Rs.85,000. The net liabilities of the firm are Rs.30,000. The normal rate of return is 10% and the average profits of the firm are Rs.8,000. Calculate the goodwill as per capitalization of super profits.
Option 1: Rs.20,000
Option 2: Rs.30,000
Option 3: Rs.25,000
Option 4: None of these
Correct Answer: Rs.30,000
Solution : Capitalised value of the firm = Average Profit X 100/Rate of return = Rs.8,000 X 100/10 = Rs.80,000 Net Assets (excluding fictitious assets) - Outside Liabilities = Rs.80,000 (Rs.85,000 - Rs.5,000) - Rs.30,000 = Rs.50,000 Goodwill = Capitalised value - Net assets = Rs.80,000 - Rs.50,000 = Rs.30,000 Hence, the correct option is 2.
Question : From the following information, (i) Capitalisation Method and (ii) at 3 year’s purchase of super profits: What will be the amount of goodwill?
(i) Total Assets Rs. 10,00,000
(ii) External Liabilities Rs. 1,80,000
(iii) Normal Rate of Return
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