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The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years?
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The profits and losses for the previous years are: 2015 Profit ₹ 10,00...
Calculation of Goodwill
Average Capital Employed: ₹2,00,000
Rate of Interest: 10%
Remuneration from Alternative Employment: ₹6,000 p.a.
Profit/Loss for Previous Years:
- 2015 Profit: ₹10,000
- 2016 Loss: ₹17,000
- 2017 Profit: ₹50,000
- 2018 Profit: ₹75,000
Calculation of Super Profit:
Average Profit: (10,000 - 17,000 + 50,000 + 75,000)/4 = ₹29,500
Normal Profit: ₹2,00,000 * 10% = ₹20,000
Super Profit: ₹29,500 - ₹20,000 = ₹9,500
Calculation of Goodwill:
Two Years' Purchase of Super Profit: 2 * ₹9,500 = ₹19,000
Goodwill: ₹19,000 * 3/2 = ₹28,500
Explanation:
Goodwill is an intangible asset that represents the value of a business's reputation, brand, and customer base. It is calculated as the difference between the total value of a business and its tangible assets.
In this case, the average capital employed in the business is ₹2,00,000, and the rate of interest expected from capital invested is 10%. The proprietor's remuneration from alternative employment is ₹6,000 p.a.
To calculate the goodwill, we first need to calculate the super profit. Super profit is the excess profit earned by a business over and above the normal profit. The normal profit is the profit that a business would earn if it invested the same amount of capital in a risk-free investment.
In this case, the average profit earned by the business over the past four years is ₹29,500. The normal profit, based on the average capital employed and the rate of interest, is ₹20,000. Therefore, the super profit is ₹9,500.
To calculate the goodwill, we need to multiply the two years' purchase of super profit by the average of the past three years' profits. In this case, the two years' purchase of super profit is ₹19,000, and the average of the past three years' profits is ₹45,000. Therefore, the goodwill is ₹28,500.
Average Capital Employed: ₹2,00,000
Rate of Interest: 10%
Remuneration from Alternative Employment: ₹6,000 p.a.
Profit/Loss for Previous Years:
- 2015 Profit: ₹10,000
- 2016 Loss: ₹17,000
- 2017 Profit: ₹50,000
- 2018 Profit: ₹75,000
Calculation of Super Profit:
Average Profit: (10,000 - 17,000 + 50,000 + 75,000)/4 = ₹29,500
Normal Profit: ₹2,00,000 * 10% = ₹20,000
Super Profit: ₹29,500 - ₹20,000 = ₹9,500
Calculation of Goodwill:
Two Years' Purchase of Super Profit: 2 * ₹9,500 = ₹19,000
Goodwill: ₹19,000 * 3/2 = ₹28,500
Explanation:
Goodwill is an intangible asset that represents the value of a business's reputation, brand, and customer base. It is calculated as the difference between the total value of a business and its tangible assets.
In this case, the average capital employed in the business is ₹2,00,000, and the rate of interest expected from capital invested is 10%. The proprietor's remuneration from alternative employment is ₹6,000 p.a.
To calculate the goodwill, we first need to calculate the super profit. Super profit is the excess profit earned by a business over and above the normal profit. The normal profit is the profit that a business would earn if it invested the same amount of capital in a risk-free investment.
In this case, the average profit earned by the business over the past four years is ₹29,500. The normal profit, based on the average capital employed and the rate of interest, is ₹20,000. Therefore, the super profit is ₹9,500.
To calculate the goodwill, we need to multiply the two years' purchase of super profit by the average of the past three years' profits. In this case, the two years' purchase of super profit is ₹19,000, and the average of the past three years' profits is ₹45,000. Therefore, the goodwill is ₹28,500.
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The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years?
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The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years? 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 The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years?.
The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years? 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 The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years?.
Solutions for The profits and losses for the previous years are: 2015 Profit ₹ 10,000, 2016 Loss ₹ 17,000, 2017 Profit ₹ 50,000, 2018 Profit ₹ 75,000. The average Capital employed in the business is ₹ 2,00,000. The rate of interest expected from capital invested is 10% . The remuneration from alternative employment of the proprietor ₹ 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of Super Profits based on the average of 3 years? in English & in Hindi are available as part of our courses for CA Foundation.
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