Average profit of the firm is Rs. 1,50,000. Total tangible assets in the firm are Rs. 14,00,000 and outside liabilities are Rs. 4,00,000. In the same type of business, the normal rate fo return is `10%` of the capital employed.
Calculate value fo goodwill by Capitalisation of Super Profit Method.

Explanation

Capital Employed = Total Tangible Assets - Outside Liabilities
` " " ` = Rs. 14,00,000 - Rs. 4,00,000 = Rs. 10,00,000
Normal Profit = Capital Employed `xx` Normal Rate of Return/100
` " " ` = 10,00,000 `xx (10)/(100)` = Rs. 1,00,000
Super Profit = Average Profit - Normal Profit
` " " ` = Rs. 1,50,000 - Rs. 1,00,000 = Rs. 50,000
Goodwill `= ("Super Profit " xx 100)/("Normal Rate of Return")= (Rs. 50,000 xx 100)/(10) = Rs. 5,00,000 .`