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Capital employed in a business is …

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Capital employed in a business is 200,000.the normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of 48,000. Calculate goodwill on the basis of 3 year purchase of super profit ?

    • Posted by Rishi Joshi 5 years, 4 months ago

    CBSE > Class 12 > Accountancy
    • 1 answers

    Gaurav Seth 5 years, 4 months ago

    Capital employed in a business = Rs. 2,00,000 (Given)

    Rate of return on capital employed = 15%  (Given)

    Super Profit = Actual Profit - Estimated profit

    Goodwill = Super profit × Number of purchase years

    Normal profit = 200000 × 15  /100

    = 30,000

    Super profit = profit earned - normal profit

    = 48,000 - 30,000

    = 18,000

    Goodwill = 18,000 × 3

    = 54,000

    Thus, goodwill on the basis of 3 years purchase of super profit will be Rs. 54,000.

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