Question

On the date of Sahil’s retirement as a partner from a firm, Goodwill was valued at ₹ 1,25,000 under the Capitalisation of Super Profit method. Super Profit of the firm was ₹ 15,000.

Find the Normal Rate of Return that was used to ascertain the Goodwill of the firm.

Answer 1

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

`1,25,000 = (15,000 xx 100)/"Normal Rate of Return"`

Normal Rate of Return = `(15,000 xx 100)/(1,25,000)`

= `(15,00,000)/(1,25,000)`

= `(1,500)/125`

= 12%