Calculate goodwill of the firm by super profit method if goodwill is valued at 2 years purchase and Capital employed is ₹1,00,000 and market rate of return is 15%. Net profit earned by the firm for the last 3 year is ₹1,08,000?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹42,000.
Normal profit = 1,00,000 x 15/100
= ₹15,000
Average profit = 1,08,000/3
= ₹36,000
Super profit = 36,000-15,000
= ₹21,000
Goodwill = 21,000*2
= ₹42,000