A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in similar business is 10%. Find out the value of Goodwill by
(i) Capitalisation of super profit method and
(ii) Super profit method if the goodwill is valued at 3 years purchase of super profit.
The assets of the business were Rs. 10,00,000 and its external liabilities Rs. 1,80,000.

Answer

2011

Explanation

(i) As per Capitalisation of Super Profits Rs. 1,80,000.
(ii) As per Super Profits Rs. 54,000.