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Question
Aayush and Aarushi are partners sharing profits and losses in the ratio of 3 : 2. They admitted Naveen into partnership for 1/4th share. Goodwill of the firm was to be valued at three years' purchase of super profits. Average net profit of the firm was ₹ 20,000. Capital investment in the business was ₹ 50,000 and Normal Rate of Return was 10%. Calculate the amount of Goodwill premium brought by Naveen.
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Solution
Average Net Profit = ₹20,000
Capital Investment or Capital Employed = ₹50,000
Normal Rate of Return= 10%
`=₹ 50,000 xx 10/100 = ₹ 5,000 `
Super Profit = Average Profit - Normal Profit
= ₹ 20,000 - ₹ 5,000
=₹ 15,000
Goodwill = Super profit × Number of year's of purchase
=₹ 15,000 × 3
=₹ 45,000
Naveen's share = `1/4`
Goodwill to be brought by Naveen = `₹ 45,000 xx 1/4 = ₹ 11,250 `
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