A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in a similar business is 10%. Given that the value of net assets of the business is Rs. 8,20,000, the value of goodwill by capitalisation of super profits method will be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 1,80,000
Under capitalisation of super profits, goodwill is the capital that would be needed to earn the super profit at the normal rate of return: Goodwill = Super Profit × 100 ÷ Normal Rate of Return.
Normal profit = Rs. 8,20,000 × 10% = Rs. 82,000
Super profit = Rs. 1,00,000 − Rs. 82,000 = Rs. 18,000
Goodwill = Rs. 18,000 × 100 ÷ 10 = Rs. 1,80,000
The book works these very figures both ways: capitalising the average profits (Rs. 10,00,000 − net assets Rs. 8,20,000) and capitalising the super profits give the same Rs. 1,80,000.
Note: This question is from NCERT (2026-27). NTA sets numerical questions from NCERT too, so do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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