(Capital Employed and Valuation of Goodwill When Trade Investments are given).
Balance Sheet of Grand Sales as at 31st March, 2019 was as follows:

Average Profit of the firm for the year was Rs. 1,75,000. Calculate the value of goodwill of the firm by Super Profit Method at 2 years' purchase of Super Profit, if the Normal Rate fo Return is `20%` .

Explanation

`{:("(i) Capital Employed by Liabilities Side Approach:",,),(" Partners' Capitals:" ,"Rs.","Rs."),(" Kanchan","2,50,000",),(" Karuna",ul("2,50,000"),ulul("5,00,000")),("(ii) Capital Employed by Assets Side Approach:","Rs.","Rs."),(" Total Assets",,"10,00,000"),(" Less: Sundry Creditors","2,50,000",),(" Bills Payable","50,000",),(" Bank Overdraff",ul("2,00,000"),ul(" 5,00,000")),(,,ulul(" 5,00,000")):}`
Normal = `20%` of Rs. 5,00,000 = Rs. 1,00,000
Super Profit = Average Profit - Normal Profit
` " " ` = Rs. 1,75,000 - Rs. 1,00,000 = Rs. 75,000
Value of Goodwill = Super Profit `xx` No. of Years' Purchase = 2 `xx` Rs. 75,000 = Rs. 1,50,000.