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The average net profit was (before adjustment) * 4,14,000. It included investment income of 4,000. The cost of investment was 1,00,000. Expenses amounting to 6,000 p.a. are likely to be discontinued in future. Tax rate is 50%. Six per cent represented a fair return. The average tangible capital employed was 27,00,000 but upto valuations obtained, the capital was valued at * 29,00,000. Assumings 5 years' purchase, what is the value of Goodwill ? ​?
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The average net profit was (before adjustment) * 4,14,000. It included...
Calculation of Average Net Profit:

- Average Net Profit (before adjustment) = 4,14,000
- Investment Income = 4,000
- Cost of Investment = 1,00,000

Adjusted Net Profit:

- Adjusted Net Profit = Average Net Profit + Investment Income - Cost of Investment
- Adjusted Net Profit = 4,14,000 + 4,000 - 1,00,000
- Adjusted Net Profit = 3,18,000

Calculation of Future Expenses:

- Expenses to be discontinued = 6,000 p.a.

Tax Rate:

- Tax Rate = 50%

Fair Return:

- Fair Return = 6%

Calculation of Tangible Capital Employed:

- Average Tangible Capital Employed = 27,00,000
- Valuation of Capital = 29,00,000

Calculation of Goodwill:

- Goodwill = (Adjusted Net Profit - (Fair Return x Valuation of Capital)) x 5
- Goodwill = (3,18,000 - (0.06 x 29,00,000)) x 5
- Goodwill = (3,18,000 - 1,74,000) x 5
- Goodwill = 7,200,000

Explanation:

- The question asks us to calculate the value of Goodwill based on certain given parameters.
- We first calculate the Adjusted Net Profit by subtracting the cost of investment from the Average Net Profit and adding the Investment Income.
- We then take into consideration the future expenses that are likely to be discontinued and the tax rate.
- We also calculate the Fair Return, which is assumed to be 6% in this case.
- The question provides us with the Average Tangible Capital Employed and the Valuation of Capital.
- We then use the formula to calculate the value of Goodwill, which is (Adjusted Net Profit - (Fair Return x Valuation of Capital)) x 5.
- The result obtained is 7,200,000. This means that the value of Goodwill is 7,200,000 based on the given parameters.
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The average net profit was (before adjustment) * 4,14,000. It included investment income of 4,000. The cost of investment was 1,00,000. Expenses amounting to 6,000 p.a. are likely to be discontinued in future. Tax rate is 50%. Six per cent represented a fair return. The average tangible capital employed was 27,00,000 but upto valuations obtained, the capital was valued at * 29,00,000. Assumings 5 years' purchase, what is the value of Goodwill ? ​?
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The average net profit was (before adjustment) * 4,14,000. It included investment income of 4,000. The cost of investment was 1,00,000. Expenses amounting to 6,000 p.a. are likely to be discontinued in future. Tax rate is 50%. Six per cent represented a fair return. The average tangible capital employed was 27,00,000 but upto valuations obtained, the capital was valued at * 29,00,000. Assumings 5 years' purchase, what is the value of Goodwill ? ​? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about The average net profit was (before adjustment) * 4,14,000. It included investment income of 4,000. The cost of investment was 1,00,000. Expenses amounting to 6,000 p.a. are likely to be discontinued in future. Tax rate is 50%. Six per cent represented a fair return. The average tangible capital employed was 27,00,000 but upto valuations obtained, the capital was valued at * 29,00,000. Assumings 5 years' purchase, what is the value of Goodwill ? ​? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The average net profit was (before adjustment) * 4,14,000. It included investment income of 4,000. The cost of investment was 1,00,000. Expenses amounting to 6,000 p.a. are likely to be discontinued in future. Tax rate is 50%. Six per cent represented a fair return. The average tangible capital employed was 27,00,000 but upto valuations obtained, the capital was valued at * 29,00,000. Assumings 5 years' purchase, what is the value of Goodwill ? ​?.
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