A partnership firm earns profit of ₹500000 whereas in market a similar firm earns 10% of capital employed. The firm has a total asset of ₹5500000 and liabilities of ₹1400000. Calculate the goodwill of the firm by capitalization of average profit.
Answer & explanation
Correct answer: option 2
Net asset of the firm= 5500000 -1400000 = ₹4100000
Capitalised value of the firm = 500000*100/10 = ₹5000000
Goodwill = 5000000- 4100000 = ₹900000