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Q. 10. A firm earned profits of 380,000, 1,00,000, 31,20,000 and 31,80,000during 2010-11, 2011-12, 2012-13 and 2013-14 respectively. The firm has capitalinvestment of 5,00,000. A fair rate of return on investment is 15% p.a. Calculategoodwill of the firm based on three years' purchase of average super profits of last fouryears. |
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Answer» TOTAL profits=380000+100000+3120000+3180000=6780000 AVERAGE profit=6780000/4=1695000 normal profit=capital invested×NRR/100 =500000×15/100=75000 super profit=actual average profit-normal profit =1695000-75000=1620000 therefore,value of goodwill=super profit×no.of YEAR's of purchase =1620000×3=4860000 |
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