If Average Capital Employed In A Firm Is ₹8,00,000, Average of Actual Profits Is ₹1,80,000 And Normal Rate of Return is 10% - Bzziii.com

If average capital employed in a firm is ₹8,00,000, average of actual profits is ₹1,80,000 and normal rate of return is 10%, then value of goodwill as
If average capital employed in a firm is ₹8,00,000, average of actual profits is ₹1,80,000 and normal rate of return is 10%, then value of goodwill as per capitalization of average profits is: 

(A) ₹10,00,000 
(B) ₹18,00,000 
(C) ₹80,00,000 
(D) ₹78,20,000




(A) ₹10,00,000 

Explanation:

Goodwill = Capitalised Value of Profit - Capital Employed
Normal Rate of Return = 10 %

Capitalised Value of Profit = Average Profit × `"100"/"Normal Rate of Return"`

= 1,80,000 × `100/10`

= 18,00,000

Capitalised Value of Profit = Rs. 18,00,000

Capital Employed = Rs, 8,00,000

Goodwill = Capitalised Value of Profit - Capital Employed

= 18,00,000 - 8,00,000

= 10,00,000

Goodwill = ₹ 10,00,000








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