Ram and Prem are partners in a retail business. Balances in Capital and Current Accounts as on 31st March 2022 were:
Ram and Prem are partners in a retail business. Balances in Capital and Current Accounts as on 31st March 2022 were:
| Capital Account (₹) | Current Account (₹) | |
| Ram | 2,00,000 | 50,000 |
| Prem | 2,40,000 | 10,000 (Dr.) |
The firm earned an average profit of ₹ 90,000. If the normal rate of return is 10%. Find the value of Goodwill by Capitalisation Method.
a) ₹ 4,20,000
b) ₹ 2,10,000
c) ₹ 1,10,000
d) ₹ 2,20,000
Anurag Pathak Changed status to publish April 17, 2023
Ans – a)
Explanation:-
Capital Employed = Ram’s Capital + Ram’s Current A/c + Prem’s Capital A/c – Prem’s Current A/c (Dr.)
Capital Employed = 2,00,000 + 50,000 + 2,40,000 – 10,000
Capital Employed = ₹ 4,80,000
Capitalised Value of Average Profit = Average Profit/Normal Rate of Return
Capitalised Value of Average Profit = 90,000 × 100/10
Capitalised Value of Average Profit = ₹ 9,00,000
Goodwill = Capitalised Value of Average Profit – Capital Employed
Goodwill = ₹ 9,00,000 – ₹ 4,80,000
Goodwill = ₹ 4,20,000
Anurag Pathak Changed status to publish April 17, 2023
