Partnership

Accounting

Easy

common

Calculate the value of the goodwill of a firm based on 3 years' purchase of super profits, if the normal rate of return is 10%, average profits for the last five years were Rs. 60,000 and the capital of the firm is Rs. 5,00,000.

Rs. 10,000

Rs. 30,000

Rs. 50,000

Rs. 60,000

✅ Correct Option: 2

Normal profit $= 5{,}00{,}000 \times 10\% = 50{,}000$ .

Super profit $= 60{,}000 - 50{,}000 = 10{,}000$ .

Goodwill $= 10{,}000 \times 3 = 30{,}000$ .

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Calculate the value of the goodwill of a firm based on 3 years' purchase of super profits, if the normal rate of return is 10%, average profits for the last five years were Rs. 60,000 and the capital of the firm is Rs. 5,00,000.

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