From the following information, calculate the value of goodwill of the firm: (i) At three years...

    

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From the following information, calculate the value of goodwill of the firm: (i) At three years purchase of Average Profit. (ii) At three years purchase of Super Profit. (iii) On the basis of capitalisation of Super Profit. (iv) On the basis of capitalisation of Average Profit. Information: (a) Average Capital Employed is Rs.6, 00,000. (b) Net profit/(Loss) of the firm for the last three years ended are: 31st March, 2018 - Rs.2, 00, 000, 31st March, 2017 - Rs.1, 80, 000 and 31st March, 2016 - Rs.1, 60,000 (c) Normal rate of Return in similar business is 10%. (d) Remuneration of Rs1, 00, 000 to partners is to be taken as charge against profit. (e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is Rs.7, 00, 000 whereas Partner's capital is Rs. 6, 00, 000 and outside Liabilities Rs.1,00,000. From the following information, calculate the value of goodwill of the firm: (i) At three years purchase of Average Profit. (ii) At three years purchase of Super Profit. (iii) On the basis of capitalisation of Super Profit. (iv) On the basis of capitalisation of Average Profit. Information: (a) Average Capital Employed is Rs.6, 00,000. (b) Net profit/(Loss) of the firm for the last three years ended are: 31st March, 2018 - Rs.2, 00, 000, 31st March, 2017 - Rs.1, 80, 000 and 31st March, 2016 - Rs.1, 60,000 (c) Normal rate of Return in similar business is 10%. (d) Remuneration of Rs1, 00, 000 to partners is to be taken as charge against profit. (e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is Rs.7, 00, 000 whereas Partner's capital is Rs. 6, 00, 000 and outside Liabilities Rs.1,00,000.

Answer rating: 100% (QA)

i first we have to find out 3 Years purchase of Average Profit method For this Step 1 Calculation of ... View the full answer