Read the passage carefully and answer the next 5 questions.
The books of a business showed that the firm's capital employed on December 31, 2024, ₹5,00,000 and the profits for the last five years were: 2020-₹40,000: 2021-₹50,000; 2022-₹55,000; 2023- ₹70,000 and 2024-₹85,000. You are required to find out the value of goodwill based on 2 years purchase of the super profits of the business, given that the normal rate of return is 10%.
In this case Average profit is
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 60,000
The average profit is the total of the past years’ profits divided by the number of years.
Total profit = Rs. 40,000 + Rs. 50,000 + Rs. 55,000 + Rs. 70,000 + Rs. 85,000
= Rs. 3,00,000
Average Profit = Rs. 3,00,000 ÷ 5
= Rs. 60,000
The book’s illustration uses the years 2011-2015; the paper moved the same profits to 2020-2024, so the answer is the same.
NCERT (2026-27 edition):
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