The capital of the firm of Mohan and Rissam is Rs. 75,0 and the rate o

1.	The capital of the firm of Mohan and Rissam is Rs. 75,0 and the rate of interest is 15%. Annual salary to partners is Rs. 5,000 each. The profit for the last 3 years were Rs.36,000,38,000 and 31,000. Goodwill is to be valued at 2 years purchase of the last 3 years average super profits. Calculate goodwill of the firm.
Answer» Goodwill = Super profit x No. of years purchase. Super profit = Actual /Average profit – Normal Profit Average profit = \(\frac{36,000+38,000+31,000}{3}\)= 35,000 Normal profit = Interest on capital + Partner’s salary Interest on capital = 75,000 x \(\frac{15}{100} = 11,250\) Normal profit = 11,250 + 10,000 = 21,250 Super profit = 35,000 - 21,250 = 13,750 Goodwill = 13,750 x 2 = 27,500

The capital of the firm of Mohan and Rissam is Rs. 75,0 and the rate of interest is 15%. Annual salary to partners is Rs. 5,000 each. The profit for the last 3 years were Rs.36,000,38,000 and 31,000. Goodwill is to be valued at 2 years purchase of the last 3 years average super profits. Calculate goodwill of the firm.

Answer»

Goodwill = Super profit x No. of years purchase.

Super profit = Actual /Average profit – Normal Profit

Average profit = \(\frac{36,000+38,000+31,000}{3}\)= 35,000

Normal profit = Interest on capital + Partner’s salary

Interest on capital = 75,000 x \(\frac{15}{100} = 11,250\)

Normal profit = 11,250 + 10,000 = 21,250

Super profit = 35,000 - 21,250 = 13,750

Goodwill = 13,750 x 2 = 27,500