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Question 9 Chapter 3 of Class 12 Part - 1
9. A firm earned net profits during the last five years ended on 31st March as follows: 2014
Rs. 94,000: 2015 Rs. 32,000; 2016 Rs. 22,000;2017 Rs. 38,000 and 2018 Rs. 44,000.
The capital invested in the firm is 2,00,000. The fair return on capital in such type of business is 10%. Find out the value oft goodwill, based on the four years' purchase of super profit of the last five years.
| Average Profit | = | Total Profit |
| Number of Years | ||
| = | 24,000++32,000+22,000+38,000+44,000 | |
| 5 | ||
| = | 1,60,000 | |
| 5 | ||
| = | 32,000 |
Normal Profit = 2,00,000 ×10/100 = Rs. 20,000
Super Profit = Average Profit - Normal Profit
= 32,000-20,000 = Rs. 12,000
Goodwill = Super Profit x Normal Rate of Return
= 12,000 x 4= Rs. 48,000
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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