Arrange the following steps in sequence for calculation of goodwill using Super Profit Method.
(A) Calculate the average profit.
(B) Calculate the normal profit on the firm's capital on the basis of the normal rate of return.
(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:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A, B, C, D
(A) Calculate the average profit.
(B) Calculate the normal profit on the firm’s capital on the basis of the normal rate of return.
(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.
NCERT (2026-27 edition): |