Arrange the Following Steps to Calculate Goodwill under the Super Profits Method-

(A) Calculate the normal profit on the firm's capital on the basis of the normal rate of return
(B) Calculate the average profit
(C) Calculate the super profits by deducting normal profit from the average profits
(D) Calculate goodwill by multiplying the super profits by the given number of years' purchase

Choose the correct answer from the options given below:

(B), (A), (C), (D)

The correct answer is Option (3) → (B), (A), (C), (D)

• (B) Calculate the average profit. → First, determine the firm’s average profit over the past few years.

• (A) Calculate the normal profit on the firm's capital on the basis of the normal rate of return. → Then, find out what profit the firm should normally earn based on industry standards.

• (C) Calculate the super profits by deducting normal profit from the average profits. → Subtract the normal profit from average profit to get super profit (excess profit).

• (D) Calculate goodwill by multiplying the super profits by the given number of years' purchase. → Finally, multiply super profit by the number of years’ purchase to find goodwill.