Accounts
super profit method (normal) :-
1.
from the following information calculation the value of
goodwill of the business.
I.
average capital employed
in the business 40,000rs.
II.
net trading profit of the firm for the past years is 2006-rs.12,200. 2007-rs.11,000. 2008-rs.2,000. 2009- rs.21,000.
III.
rate of interest expected from capital 10%.
IV.
fair remuneration to the service of manager 3,600 per annum.
3years purchase on
additional profit on the basic of average profit of previous years be treated
as goodwill.
calculation super profit method
particulars amount
(rs.)
expected average
profit:-
average profit=12,200+11,000+2,000+21,000 11,550
4
(-)remuneration
manager 3,600
Expected
average profit→ 7,950
Less:-
normal profit :
Capital employed × normal rate of return
(40,000
× 10/100) 4,000
Super
profit → 3,950
Goodwill=super profit × no of years purchase
=3,950 × 3
=11,850.
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