(Capitalisation Method). A firm earned Rs. 60,000 as profit, the normal rate of return being `10%` . Assets of the firm are Rs. 7,20,000 (excluding goodwill) and Liabilities are Rs. 2,40,000. Find the value of goodwill by Capitalisation of Average Profit Method.
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Total Capitalised Value of the Firm `= ("Average Profit " xx 100)/("Normal Rate of Return")` ` " " = (Rs. 60,000 xx 100)/(10)=Rs. 6,00,000` Net Assets of the Firm = Total Assets - Liabilities ` " " `= Rs. 7,20,000 - Rs. 2,40,000 = Rs. 4,80,000 Goodwill = Total Capitalised Value of the Firm - Net Assets ` " " ` = Rs. 6,00,000 - Rs. 4,80,000 = Rs. 1,20,000.
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