# Question 21 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 21 Chapter 3 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 21 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

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 +2 Part-1 – USHA Publication 12 Class Part – 1: –

 Actual Profits p.a = Rs.60,000 Capital Employed = Rs. 50,000 Rate of return = 10%

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

i) Super Normal Profit Method

 Super Profit = Actual Profit – Normal Profit = 60,000 – 50,000 = 10,000

 Number of years’ purchase = 2 Goodwill = Super Profit X Number of years’ purchase = 10,000 X 2 = 20,000

ii) Capitalisation Method:

a) Capitalisation of Super Profits Method:

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

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

Comment if you have any questions.

Also, Check out the solved question of previous Chapters: –