(Super Profit Method).
Average net profit of Home Depot expected in the future is Rs. 54,000 per year. The average capital employed in the business is Rs. 3,00,000. Normal profit expected from capital invested in this class of business is `10%`. The remuneration of the partners is estimated to be Rs. 9,000 p.a.
Find out the value of goodwill on the basis of two years' purchase of super profit.

Explanation

`{:(,"Rs.","Rs."),("Average profit",,"54,000"),("Less: Partners' remuneration","9,000",),("Normal Profit on capital employed (Rs.3,00,000"xx"10/100)",ul("30,000"),ul("39,000")),("Super Profit",,ulul("15,000")):}`
Goodwill, being two years' purchase of Super Profit = Rs. 15,000 `xx` 2 = Rs. 30,000.
Partners' remuneration is deducted to determine normal profit because it is their services to the firm for handling business.