Goodwill of the firm was valued at Rs. 6,00,000 being valued at 3 years purchase of super profits.

If Normal rate of return was 10% and actual profits amounted to Rs. 3,50,000. Determine Capital Employed.

Rs. 15,00,000

The correct answer is Option (1) → Rs. 15,00,000

Goodwill on basis of super profit = ₹600000.
Goodwill = Super profits x No of years purchase
600000 = Super profits x 3
Super profits = 600000/3
                      = 200000

Super profit = Actual profit -Normal profit
200000 = 350000 - Normal profit
Normal profit = 350000 - 200000
                      = 150000

Normal profit = Capital employed x Rate/100
150000 = Capital employed x 10/100
Capital employed = 150000 x 100/10
                             = 1500000