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Question
Total capital employed in the firm is ₹ 8,00,000, reasonable rate of return is 15% and profit for the year is ₹ 12,00,000. The value of goodwill of the firm as per capitalization method would be ______.
Options
₹ 82,00,000
₹ 12,00,000
₹ 72,00,000
₹ 42,00,000
MCQ
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Solution
Total capital employed in the firm is ₹ 8,00,000, reasonable rate of return is 15% and profit for the year is ₹ 12,00,000. The value of goodwill of the firm as per capitalization method would be ₹ 72,00,000.
Explanation:
Normal Profit = Capital Employed × Normal Rate of Return
= 8,00,000 × 15%
= ₹ 1,20,000
Super Profit = Actual Profit − Normal Profit
= 12,00,000 − 1,20,000
= ₹ 10,80,000
Goodwill = `"Super Profit" xx 100/"Normal Rate of Return"`
= `10,80,000 xx 100/15`
= ₹ 72,00,000
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