Question : Under the super profit method, goodwill is calculated by
Option 1: Number of years purchase X Average profit
Option 2: Number of years purchase X Super profit
Option 3: super profit/normal rate of return
Option 4: super profit - normal profit
Correct Answer: Number of years purchase X Super profit
Solution : Answer = number of year purchase X super profit
Under the super profit method, goodwill is calculated by multiplying the super profit by the number of years of purchase. This method assesses the excess profit generated by a business beyond the normal rate of return and quantifies it over a specific period to determine the value of goodwill.
Goodwill = super profit X no. of years purchase Hence, the correct option is 2.
Question : Under average profit methods goodwill is calculated as
Question :
The Formula for Capitalisation of Super Profit Method is:
Question : Under which method of valuation of goodwill, normal rate of return is not considered?
Question : Under the Capitalisation Method of valuation of Goodwill, the formula for calculating goodwill is:
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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