Arrange the steps in order to find out the value of goodwill based on Super Profit Method.
A. Calculate the super profit by deducting normal profit from the average profits
B. Calculate the normal profit on the firm’s capital on the basis of the normal rate of return
C. Calculate the average profit
D. Calculate goodwill by multiplying the super profits by the given number of years’ purchase
Choose the correct sequence from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → C, B, A, D
Under the super profits method, goodwill is worked out in this order:
C. Calculate the average profit
B. Calculate the normal profit on the firm’s capital at the normal rate of return
A. Calculate the super profit by deducting the normal profit from the average profit
D. Calculate goodwill by multiplying the super profit by the number of years’ purchase
NCERT (2026-27 edition):
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