Question : The profits of last three years are Rs.4,20,000, Rs.3,90,000 and Rs.4,50,000. Capital employed is Rs.40,00,000 and normal rate of return is 10%. The amount of goodwill calculated on the basis of super profit method for three years of purchase will be:
Option 1: Rs.80,000
Option 2: Rs.40,000
Option 3: Rs.20,000
Option 4: Rs.60,000
Correct Answer: Rs.60,000
Solution :
Average Profit = Sum of profits/Total number of years = (Rs.4,20,000 + Rs.3,90,000 + Rs.4,50,000)/3 = Rs.12,60,000/3 = Rs.4,20,000.
Normal Profit = Capital employed X Normal rate of return = Rs.40,00,000 X 10% = Rs.4,00,000.
Super Profit = Average Profit - Normal Profit = Rs.4,20,000 - Rs.4,00,000 = Rs.20,000
Goodwill = Super Profit X Number of years purchase = Rs.20,000 X 3 = Rs.60,000.
Hence, the correct option is 4.
Related Questions
Trending Articles/News
