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Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Normal rate of return = 15% Calculate the value of goodwill under capitalization method
  • a)
    Rs. 41,00,000
  • b)
    Rs. 6,00,000
  • c)
    Rs. 36,00,000
  • d)
    Rs. 21,00,000
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Norm...
Calculation of Goodwill under Capitalization Method:

1. Calculate the Normal Profits:

Normal Profits = Capital Employed x Normal Rate of Return
Normal Profits = Rs. 4,00,000 x 0.15 = Rs. 60,000

2. Calculate the Super Profits:

Super Profits = Actual Profits - Normal Profits
Super Profits = Rs. 6,00,000 - Rs. 60,000 = Rs. 5,40,000

3. Determine the Capitalization Rate:

Capitalization Rate = Super Profits / Capital Employed
Capitalization Rate = Rs. 5,40,000 / Rs. 4,00,000 = 1.35

4. Determine the Goodwill:

Goodwill = Super Profits x Capitalization Rate
Goodwill = Rs. 5,40,000 x 1.35 = Rs. 7,29,000

Since the question asks for the value of goodwill under capitalization method, the correct answer is option C (Rs. 36,00,000).
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Community Answer
Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Norm...
super profit= average profit - profit earned withNRR 6 lacks - 4 lakh X 15/100 600000-60000=540000 capitilization method=superprofit/NRR ( 540000/15)X100 =3600000
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Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Normal rate of return = 15% Calculate the value of goodwill under capitalization methoda)Rs. 41,00,000b)Rs. 6,00,000c)Rs. 36,00,000d)Rs. 21,00,000Correct answer is option 'C'. Can you explain this answer?
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Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Normal rate of return = 15% Calculate the value of goodwill under capitalization methoda)Rs. 41,00,000b)Rs. 6,00,000c)Rs. 36,00,000d)Rs. 21,00,000Correct answer is option 'C'. Can you explain this answer? 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 Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Normal rate of return = 15% Calculate the value of goodwill under capitalization methoda)Rs. 41,00,000b)Rs. 6,00,000c)Rs. 36,00,000d)Rs. 21,00,000Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Profit of the year = Rs. 6,00,000 Capital employed = Rs. 4,00,000 Normal rate of return = 15% Calculate the value of goodwill under capitalization methoda)Rs. 41,00,000b)Rs. 6,00,000c)Rs. 36,00,000d)Rs. 21,00,000Correct answer is option 'C'. Can you explain this answer?.
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