Firms capital in a business is ₹2,00,000. The normal rate of return on firm capital is 15%. During the year, the firm earned a profit of ₹48,000. Calculate goodwill on the basis of 3 years purchase of super profit.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) - ₹54,000.
Capital = ₹200,000
Normal rate of return = 15%
NORMAL PROFIT = Capital x Rate of return/100
= 2,00,000 x 15/100
= ₹30,000
Actual profit = ₹48,000
Super profit = Actual profit - Normal profit
= 48,000 - 30,000
= ₹18,000
Goodwill = Super profit x No of years purchase
= 18,000 x 3
= ₹54,000