Commerce Exam > Commerce Questions > From the following information, calculate val...
Start Learning for Free
From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.?
Most Upvoted Answer
From the following information, calculate value of goodwill of the fir...
Calculation of Goodwill of the Firm using Capitalisation Method
Given Information:
- Total Capital of the Firm: 2400000
- Normal Rate of Return: 10%
- Profit for the Year: 300000
Explanation:
- The capitalisation method is used to calculate the value of goodwill of a firm.
- This method is based on the assumption that the value of goodwill is equal to the excess of super profits earned by the firm over and above the normal profits.
- Super profits are the profits earned by the firm over and above the normal profits, which are necessary to attract and retain capital.
- The formula for calculating the value of goodwill using capitalisation method is:
- Goodwill = Average Super Profit x Number of Years' Purchase
- Number of Years' Purchase = 100 / Normal Rate of Return
Calculation:
- Normal Rate of Return = 10%
- Number of Years' Purchase = 100 / 10 = 10
- Average Super Profit = Profit for the Year - Normal Profit
- Normal Profit = Total Capital x Normal Rate of Return
- Normal Profit = 2400000 x 10% = 240000
- Average Super Profit = 300000 - 240000 = 60000
- Goodwill = Average Super Profit x Number of Years' Purchase
- Goodwill = 60000 x 10 = 600000
Conclusion:
- The value of goodwill of the firm using capitalisation method is 600000.
Community Answer
From the following information, calculate value of goodwill of the fir...
If we applying average capitalisation method then calculations will be...
capital value of A.P=Average profit×100/NRR
= 3lakh× 100/10=30lakh Rs
Now,capital employed=24lakh Rs
goodwill=Capital value if AP-capital employed
= 30lakh - 24lakh=6lakh Rs
Ans.=600000 Rs
capital value of A.P=Average profit×100/NRR
= 3lakh× 100/10=30lakh Rs
Now,capital employed=24lakh Rs
goodwill=Capital value if AP-capital employed
= 30lakh - 24lakh=6lakh Rs
Ans.=600000 Rs
Attention Commerce Students!
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.
|
Explore Courses for Commerce exam
|
|
Similar Commerce Doubts
Top Courses for CommerceView all
From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.?
Question Description
From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.?.
From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.?.
Solutions for From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? in English & in Hindi are available as part of our courses for Commerce.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? defined & explained in the simplest way possible. Besides giving the explanation of
From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.?, a detailed solution for From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? has been provided alongside types of From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? theory, EduRev gives you an
ample number of questions to practice From the following information, calculate value of goodwill of the firm by applying capitalisation method: Total capital of the firm 2400000 Normal rate of return 10%. Profit for the year 300000.? tests, examples and also practice Commerce tests.
|
|
Explore Courses for Commerce exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup