CBSE 2025, Compartment, Set 1

Question

From the following information, calculate the value of goodwill of the firm:
(i) On the basis of capitalisation of super profits, and
(ii) On the basis of capitalisation of average profits.
Average profit for the last four years: ₹20,00,000
Capital Employed: ₹25,00,000
Normal Rate of Return: 20%
Net Assets of the business: ₹25,00,000

Edvaya · Accepted Answer

The correct answer is Subjective. **1. On the basis of Capitalisation of Super Profits:** Normal Profit = Capital Employed $	imes$ Normal Rate of Return / 100 = $25,00,000 	imes 20\% = ₹5,00,000$ Super Profit = Average Profit - Normal Profit = $20,00,000 - 5,00,000 = ₹15,00,000$ Goodwill = Super Profit $	imes$ 100 / Normal Rate of Return = $15,00,000 	imes 100 / 20 = ₹75,00,000$ **2. On the basis of Capitalisation of Average Profits:** Capitalised value of the firm = Average Profit $	imes$ 100 / Normal Rate of Return = $20,00,000 	imes 100 / 20 = ₹1,00,00,000$ Goodwill = Capitalised value of the firm - Net Assets (Capital Employed) = $1,00,00,000 - 25,00,000 = ₹75,00,000$

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Accountancy > Accounting For Partnership Firms > Valuation Of Goodwill

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