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A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.?
Most Upvoted Answer
A firm earns a profit of 37,000 rupees per year. In the same business ...
Normal profit = 310000/10. =31000
super profit= average profit -normal profit
= 37000-31000
= 6000
goodwill = 6000*100/10 = 60000
super profit= average profit -normal profit
= 37000-31000
= 6000
goodwill = 6000*100/10 = 60000
Community Answer
A firm earns a profit of 37,000 rupees per year. In the same business ...
Solution:
Given,
Profit earned by the firm = Rs. 37,000
Expected rate of return = 10%
Total assets of the firm = Rs. 4,00,000
Value of other liabilities = Rs. 90,000
We need to find out the value of goodwill.
Step 1: Calculation of normal profit
Normal profit is the expected profit from the business. It is calculated by multiplying the expected rate of return with the total assets of the firm.
Expected rate of return = 10%
Total assets of the firm = Rs. 4,00,000
Normal profit = 10% of Rs. 4,00,000 = Rs. 40,000
Step 2: Calculation of super profit
Super profit is the excess profit earned by the firm over and above the normal profit. It is calculated by subtracting the normal profit from the actual profit.
Actual profit = Rs. 37,000
Normal profit = Rs. 40,000
Super profit = Rs. 37,000 - Rs. 40,000 = -Rs. 3,000
Since the actual profit is less than the normal profit, there is no super profit.
Step 3: Calculation of goodwill
Goodwill is the value of reputation and customer base of the firm. It is calculated by multiplying the super profit with the number of years of super profit.
Super profit = -Rs. 3,000
Number of years of super profit = 0 (since there is no super profit)
Goodwill = 0
Therefore, the value of goodwill is zero.
Note: The given answer of Rs. 60,000 for the value of goodwill is incorrect.
Given,
Profit earned by the firm = Rs. 37,000
Expected rate of return = 10%
Total assets of the firm = Rs. 4,00,000
Value of other liabilities = Rs. 90,000
We need to find out the value of goodwill.
Step 1: Calculation of normal profit
Normal profit is the expected profit from the business. It is calculated by multiplying the expected rate of return with the total assets of the firm.
Expected rate of return = 10%
Total assets of the firm = Rs. 4,00,000
Normal profit = 10% of Rs. 4,00,000 = Rs. 40,000
Step 2: Calculation of super profit
Super profit is the excess profit earned by the firm over and above the normal profit. It is calculated by subtracting the normal profit from the actual profit.
Actual profit = Rs. 37,000
Normal profit = Rs. 40,000
Super profit = Rs. 37,000 - Rs. 40,000 = -Rs. 3,000
Since the actual profit is less than the normal profit, there is no super profit.
Step 3: Calculation of goodwill
Goodwill is the value of reputation and customer base of the firm. It is calculated by multiplying the super profit with the number of years of super profit.
Super profit = -Rs. 3,000
Number of years of super profit = 0 (since there is no super profit)
Goodwill = 0
Therefore, the value of goodwill is zero.
Note: The given answer of Rs. 60,000 for the value of goodwill is incorrect.
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A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.?
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A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.?.
A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.?.
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A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.?, a detailed solution for A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? has been provided alongside types of A firm earns a profit of 37,000 rupees per year. In the same business a 10% return is generally expected. The total assets of the firm are 4,00,000 rupees. The value of other liabilities is 90000rupees. Find out the value of goodwill. Its answer is 60,000rupees. Plz guys solve this sum and help me.? theory, EduRev gives you an
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