Question

Rajan and Rajani are partners in a firm. Their capitals were Rajan ₹ 3,00,000; Rajani ₹ 2,00,000. During the year 2018−19, the firm earned a profit of ₹ 1,50,000. Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the normal rate of return is 20%.

Answer 1

Goodwill = Super Profits x `100/"Normal Rate of Return"`

Super Profits = Average Profit - Normal Profit

Average Profit = Rs. 1,50,000 (Given)

Normal Profit = Capital Employed x Normal Rate of Return
Normal Profit = ( 3,00,000 + 2,00,000) x 20 % = Rs. 1,00,000

Super Profit = 1,50,000 - 1,00,000 = Rs. 50,000

Goodwill = 50,000 x `100/20` = Rs. 2,50,000.