Calculate firm's goodwill from the following information-
Super profit - ₹20,000
Normal Profit - ₹10,000
Normal Rate of Return - 20%
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹1,00,000.
According to capitalisation of super profit method, Goodwill = (Super Profit X 100) / Normal rate of return
So, Goodwill = (20,000 X 100)/ 20
= 20,00000/20
= 1,00,000