Average profit of a partnership firm is ₹50000 per year. Average capital employed in the business is ₹300000. If the normal rate of return on capital employed is 10%. Calculate goodwill of the firm by the capitalisation of super profit method?
Answer & explanation
Correct answer: option 3
Normal profit = 300000*10/100= ₹30000
Average profit= ₹50000
So, Super profit = 50000-30000= ₹20000
GOODWILL= SUPER PROFIT*100/NORMAL RATE OF RETURN
= 20000*100/10 =₹200000