A partnership firm earned net profits during the last three years as follows:
`{:("Years","Net Profit (Rs.)"),(2007-2008,"1,90,000"),(2008-2009,"2,20,000"),(2009-2010,"2,50,000"):}`
The capital employed in the firm throughout the above mentioned period has been Rs. 4,00,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital. The remuneration of all the partners during this period is estimated to be Rs. 1,00,000 per annum.
Calculate the value of goodwill on the basis of (i) two year's purchase of super profits earned on average basis during the above mentioned three years and (ii) by capitalisation of average profits method.

Answer

2011

Explanation

(i) As per Super Profits Rs. 1,20,000.
(ii) As per Capitalisation of Average Profits Rs. 4,00,000.