- Goodwill = super profit * years of purchase.
- Super profit = average profit – normal profit.
Given:
- capital of anuj and benu/capital employed=10,00,000
- market rate/normal rate=15%
- annual salary=60,000 each
- net profit of last three years=3,00,000,3,60,000 and 4,20,000
- no. of years purchase=2
1.average profit
annual salary=60,000 each
anuj and benu=60,000+60,000
=1,20,000
annual salary will be minus because annual salary is the normal expenses
net profit=3,00,000-1,20,000
=1,80,000
=3,60,000-1,20,000
=2,40,000
=4,20,000-1,20,000
=3,00,000
average profit=1,80,000+2,40,000+3,00,000/3
=7,20,000/3
=2,40,000
2.normal profit=capital employed×normal rate/100
=10,00,000×15/100
=1,50,000
3.super profit=average profit-normal profit
=2,40,000-1,50,000
=90,000
4.goodwill=super profit×no. of years purchase
=90,000×2
=1,80,000
