Read the passage carefully and answer the next 5 questions.
The books of a business showed that the firm's capital employed on December 31, 2024, ₹5,00,000 and the profits for the last five years were: 2020-₹40,000: 2021-₹50,000; 2022-₹55,000; 2023- ₹70,000 and 2024-₹85,000. You are required to find out the value of goodwill based on 2 years purchase of the super profits of the business, given that the normal rate of return is 10%.
Goodwill is -
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 20,000
Under the super profits method, goodwill = super profit × number of years’ purchase.
Super Profit = Rs. 60,000 − Rs. 50,000 = Rs. 10,000
Goodwill = Rs. 10,000 × 2
= Rs. 20,000
The book’s illustration takes 3 years’ purchase and gets Rs. 30,000; the paper asks for 2 years’ purchase, so read the number of years from the question each time.
NCERT (2026-27 edition):
NCERT (2026-27 edition): |
