The following particulars are available in respect of a business carried on by a trader:

1. Profits earned: 2002 = Shs 50,000; 2003 = Shs 60,000; 2004 = Shs 55,000.
2. Normal rate of profit = 10 %
3. Capital employed = Shs 300,000
4. The present value of annuity of one shilling for five years at 10 % is Shs 3.78
5. The profits included non-recurring profits on an average basis of Shs 4,000 out of which it is deemed that even non-recurring profits had a tendency of appearing at the rate of Shs 1,000 p.a.

You are required to calculate goodwill

1. As per five years purchase of super profits
2. As per Capitalisation of super profits method
3. As per annuity method

Answer rating: 100% (QA)

Answer Average profits Total Profit Number of years 50000 60000 55000 ... View the full answer