"From the following information calculate the amount of Goodwill -
Net Assets - 60,000
Average Profit - 20,000
Normal Rate of Return - 20%"
Average Profit - 20,000
Normal Rate of Return - 20%"
Answer & explanation
Correct answer: option 4
"Goodwill = Capitalised Value of Average Profits - Net Assets
Capitalised Value = Average Profit*100/ NRR
= 20,000 *100 / 20
= 1,00,000
Goodwill = 1,00,000 - 60,000 = 40,000
"
Capitalised Value = Average Profit*100/ NRR
= 20,000 *100 / 20
= 1,00,000
Goodwill = 1,00,000 - 60,000 = 40,000
"