Question 21 Chapter 3 of Class 12 Part – 1 Usha Publication

Question 21 Chapter 3 of Class 12 Part – 1 Usha Publication

21. The average net profit expected in future by Ram Lal & Co. are ₹ 60,000 per year. The average capital employed in the business by firm 5,00,000. The normal rate of return on the capital employed in similar business is 10%. Calculate goodwill of the firm by

(a) Super profit method on the basis of two years purchase, and
(b) Capitalisation method (Super Profit & Average Profit both)

The solution of Question 21 Chapter 3 of Class 12 Part – 1 Usha Publication: -

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Normal Profit	=	Capital Employed	X	Normal Rate of Return
				100
	=	5,00,000	X	10
				100
	=	50,000

Calculation of Super Profit	=	Average Adjusted Profit - Normal Profit
	=	60,000  – 50,000
	=	10,000
Calculation of Super Profit	=	Super Profit X No. of years' Purchased
Goodwill	=	10,000 X 2
Goodwill	=	20,000

b) Capitalisation of Business :

Goodwill	=	SuperProfit	X	100
				Normal Rate of Return
	=	10,000	X	100
				10
	=	1,00,000

Capitalised Value of Average Profit	=	Average Profit	X	100
				Normal Rate of Return
	=	60,000	X	100
				10
	=	6,00,000

Goodwill	=	Capitalised value of the business - Average Capital
	=	6,00,000 - 5,00,000
	=	1,00,000

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