The goodwill based on capitalization of average profit method is valued at ₹1,80,000. If Net Assets are ₹8,20,000 then find the capitalized value of average profits.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹10,00,000.
Goodwill = 1,80,000
Net assets of the business = 8,20,000
Goodwill = Capitalised value of average profits - Net assets
1,80,000 = Capitalised value of average profits - 8,20,000
Capitalised value of average profits = 1,80,000 + 8,20,000
= 10,00,000