Puneet and Tarun are in the restaurant business having credit balances in their fixed capital accounts as ₹ 2,50,000 each.

They have credit balances in their Current Accounts of ₹ 30,000 and ₹ 20,000 respectively. The firm does not have any liability.

They are regularly earning profits and their average profit for the last 5 years is ₹ 1,00,000.

If the normal rate of return is 10%. Find the value of goodwill by Capitalisation of the Average Profit Method.

[Ans.: Goodwill – ₹ 4,50,000]

Anurag Pathak Changed status to publish April 18, 2023