The total Capital employed in the firm is ₹ 8,00,000, the Normal Rate of Return is 15% and the profit for the year is ₹ 1,20,000. Value of goodwill as per the Capitalisation Method would be:
The total Capital employed in the firm is ₹ 8,00,000, the Normal Rate of Return is 15% and the profit for the year is ₹ 1,20,000. Value of goodwill as per the Capitalisation Method would be:
a) ₹ 8,20,000
b) ₹ 1,20,000
c) ₹ Nil
d) ₹ 4,20,000
Anurag Pathak Changed status to publish April 16, 2023
Ans – c)
Explanation:-
Capitalised Value of Average Profit = Average Profit/Normal Rate of Return
Capitalised Value of Average Profit = 1,20,000 * 100/15
Capitalised Value of Average Profit = ₹ 8,00,000
Goodwill = Capitalsed Value of Average Profit – Capital Employed
Goodwill = ₹ 8,00,000 – ₹ 8,00,000
Goodwill = Nil
Anurag Pathak Changed status to publish April 16, 2023
