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%.
Super profit is-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 10,000
Super profit is the excess of the average profit over the normal profit. Goodwill exists only because the firm earns this excess.
Average Profit = Rs. 60,000
Normal Profit = Rs. 5,00,000 × 10 ÷ 100 = Rs. 50,000
Super Profit = Rs. 60,000 − Rs. 50,000
= Rs. 10,000
NCERT (2026-27 edition):
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