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(Capital employed and Valuation of Goodw...

(Capital employed and Valuation of Goodwill when Non-trade Investments are given).
Balance Sheet fo M/s Super Stores as at 31st March, 2019 was as follows:

Average Profit was Rs. 1,25,000. You are to calculate goodwill at 3 years' purchase of Super Profits, if the Normal Rate of Return is `15%` Of Capital Employed.

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`{:("(i) Capital Employed by Liabilities Side Approach:","Rs.","Rs."),(" Partners' Capitals:" ,,),(" Alia","1,50,000",),(" Ranbir","1,50,000",),(" Rishi",ul("1,50,000"),"4,50,000"),(" Add: Reserves",,ul("2,50,000")),(,,"7,00,000"),(" Less: investments (Note)","1,00,000",),(" Deferred Revenue Expenditure (Advertisement Suspense)",ul(" 50,000"),ul("1,50,000")),(" Capital Employed",,ulul("5,50,000")):}`
`{:("(ii) Capital Employed by Asset Side Approach:","Rs.","Rs."),(" Total Assets" ,,"11,00,000"),(" Less: investments (Note)","1,00,000",),(" Deferred Revenue Expenditure (Advertisement Suspense)",ul(" 50,000"),ul(" 1,50,000")),(,," 9,50,000"),(" Less: Current Liabilities:",,),(" Sundry Creditors","3,00,000",),(" Outstanding Expenses"," 10,000",),(" Bank Overdraft(cash credit)",ul(" 90,000"),ul(" 4,00,000")),(" Capital Employed",,ulul(" 5,50,000")):}`
Normal Profit = `15%` of Rs. 5,50,000 = Rs. 82,500
Average Profit = Rs. 1,25,000
Super Profit = Rs. 1,25,000 - Rs. 82,500 = Rs. 42,500
Goodwill = No. of Years' Purchase `xx` Super Profit
` " " ` = 3 `xx` Rs. 42,500 = Rs. 1,27,500.
Note: Unless investments are specified to be trade investments, they are considered to be Non-trade investments. They are, therefore, deducted to calculate Capital Employed.
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