Page 139 - VIRANSH COACHING CLASSES
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1 : Find the value of Goodwill from the following information by using Super Profit Method.
Year Amount (`)
2014 80,000 (Profit)
2015 95,000 (Profit)
2016 1,10,000 (Profit)
2017 40,000 (Loss)
2018 85,000 (Profit)
i) Capital employed is ` 3, 50, 000
ii) Normal Rate of Return is 12%
iii) Goodwill is to be valued at two year’s purchase of super profit.
i) Calculation of Average Profit
Total Profit
Average Profit =
Number of years
80,000 + 95,000 + 1,10,000 - 40,000 + 85,000
=
5
= ` 3,30,000
5
= ` 66,000
ii) Calculation of Normal Profit
Capital employed × NRR
Normal Profit =
Number of years
3,50,000 ×12
= `
100
= ` 42,000
ii) Calculation of Super Profit
Super Profit = Average Profit - Normal Profit
= 66,000 - 42,000
= ` 24,000
iii) Calculation of Goodwill
Goodwill = Super Profit × No. of year’s purchases
= 24,000 × 2
= ` 48,000
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