Question

Rishi and Suman were partners in a firm. Their capitals were Rishi ₹ 1,20,000 and Suman ₹ 80,000. The normal rate of return in similar business is 12%. The profits of the last four years were:

Year	₹
2019-20	33,000
2020-21	31,000
2021-22	25,000
2022-23	34,000

Calculate goodwill of the firm based on:

1. Three years’ purchase of the last three years’ average profits.
2. Capitalisation of last 3 years’ super profit.

Hint: Average Profit of last 3 years is ₹ 30,000.

Answer 1

Given:

Rishi’s Capital = ₹ 1,20,000

Suman’s Capital = ₹ 80,000

Total Capital Employed = ₹ 2,00,000

Normal Rate of Return (NRR) = 12%

Average Profit of last 3 years is ₹ 30,000.

Goodwill = 30,000 × 3

= ₹ 90,000

Capitalised Value `= "Average Profit" xx 100/"Normal Rate of Return"`

= `30,000 xx 100/12`

= ₹ 2,50,000

Normal Profit = Capital Employed × Normal Rate of Return

= `2,00,000 × 12/100`

= ₹ 24,000

Super Profit = Average Profit − Normal Profit

= 30,000 − 24,000 

= ₹ 6,000

Goodwill `= "Super Profit" xx 100/"Normal Rate of Return"`

= `6,000 xx 100/12`

= ₹ 50,000