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calculate the value of goodwill by super profit method, when goodwill is to be valued at 2.5 years' purchase of the average profits of the last 5 years. Profits of previous five years are given below 2019-60,000, 2018 - 40,000, 2017 - ? 1,10,000, 2016 - 40,000, 2015 - 30,000 Capital investment of the firm is 1,00,000 and having rate of return is 20%.

Posted by . , 5 years, 10 months ago

CBSE > Class 12 > Accountancy

1 answers

Ayushi Chouhan 5 years, 10 months ago

Normal profit = 100000 ×20/100 =20000 Super profit = average profit - normal profit =280000 - 20000 =260000 Goodwill = super profit × number of year purchase = 260000 × 2.5 = 650000

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