Experts can you tell proper answer of this question?
Dear Student,
On the basis of capitalization of super profits:
Goodwill = Super profits x 100/normal rate of return
Normal profits = Capital employed x rate of return/100
= 7,00,000 × 15/100 = Rs.1,05,000
Super profit = Average profit - Normal profit
= (1,80,000 - 15,000 - 30,000) - 1,05,000 = Rs.30,000
Goodwill = 30,000 x 100/15
Goodwill = Rs.2,00,000
On the basis of capitalization of average profits:
Goodwill = capitalised average profits - actual capital employed
Capitalised average profits = Average profits x 100/ normal rate of return
= (1,80,000 - 15,000 - 30,000) x 100/15 = Rs.9,00,000
Goodwill = 9,00,000 - 7,00,000
Goodwill = Rs.2,00,000
Regards
On the basis of capitalization of super profits:
Goodwill = Super profits x 100/normal rate of return
Normal profits = Capital employed x rate of return/100
= 7,00,000 × 15/100 = Rs.1,05,000
Super profit = Average profit - Normal profit
= (1,80,000 - 15,000 - 30,000) - 1,05,000 = Rs.30,000
Goodwill = 30,000 x 100/15
Goodwill = Rs.2,00,000
On the basis of capitalization of average profits:
Goodwill = capitalised average profits - actual capital employed
Capitalised average profits = Average profits x 100/ normal rate of return
= (1,80,000 - 15,000 - 30,000) x 100/15 = Rs.9,00,000
Goodwill = 9,00,000 - 7,00,000
Goodwill = Rs.2,00,000
Regards