A business has earned average profits of ₹2,50,000 during the last few years. The firm has assets of ₹25,00,000 and external liabilities of ₹4,50,000. The normal rate of return in similar businesses is 10%. Calculate the value of goodwill by the capitalisation of super profit method.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹4,50,000
Under the capitalisation of super profit method, goodwill = super profit × 100 ÷ normal rate of return. Capital employed is the assets less the outside (external) liabilities.
Capital employed = ₹25,00,000 − ₹4,50,000 = ₹20,50,000
Normal profit = ₹20,50,000 × 10/100 = ₹2,05,000
Super profit = ₹2,50,000 − ₹2,05,000 = ₹45,000
Goodwill = ₹45,000 × 100/10 = ₹4,50,000
Note: The book prints this formula on one line without the division sign; it reads Goodwill = Super Profits × 100 ÷ Normal Rate of Return.
NCERT (2026-27 edition):
|
