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A firm earned net profits during last 3 years:
2004 Rs. 17,000
2005 Rs. 20,000
2006 Rs. 23,000
The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:
2004 Rs. 17,000
2005 Rs. 20,000
2006 Rs. 23,000
The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:
- a)Rs. 16,000
- b)Rs. 20,000
- c)Rs. 30,000
- d)Rs. 40,000
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. ...
Super profit= (17000+20000+23000)÷3-80000×15÷100=8000, goodwill =8000×2=16000.
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A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. ...
The value of goodwill can be calculated by using the formula: Goodwill = Average Super Profits x Number of Years Purchase.
To calculate the average super profits, we need to find the average net profit for the last 3 years.
Step 1: Calculate average net profit
Average Net Profit = (Net Profit 2004 + Net Profit 2005 + Net Profit 2006) / 3
= (17,000 + 20,000 + 23,000) / 3
= 60,000 / 3
= 20,000
Step 2: Calculate super profit
Super Profit = Average Net Profit - Normal Profit
Normal Profit = Capital Employed x Rate of Return
= 80,000 x 15% (given)
= 12,000
Super Profit = 20,000 - 12,000
= 8,000
Step 3: Calculate the value of goodwill
Value of Goodwill = Average Super Profits x Number of Years Purchase
= 8,000 x 2 (given)
= 16,000
Therefore, the value of goodwill on the basis of two years purchase of average super profits earned is Rs. 16,000 (option A).
To calculate the average super profits, we need to find the average net profit for the last 3 years.
Step 1: Calculate average net profit
Average Net Profit = (Net Profit 2004 + Net Profit 2005 + Net Profit 2006) / 3
= (17,000 + 20,000 + 23,000) / 3
= 60,000 / 3
= 20,000
Step 2: Calculate super profit
Super Profit = Average Net Profit - Normal Profit
Normal Profit = Capital Employed x Rate of Return
= 80,000 x 15% (given)
= 12,000
Super Profit = 20,000 - 12,000
= 8,000
Step 3: Calculate the value of goodwill
Value of Goodwill = Average Super Profits x Number of Years Purchase
= 8,000 x 2 (given)
= 16,000
Therefore, the value of goodwill on the basis of two years purchase of average super profits earned is Rs. 16,000 (option A).
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A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer?
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A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer?.
A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm earned net profits during last 3 years:2004 Rs. 17,0002005 Rs. 20,0002006 Rs. 23,000The Capital employed Rs. 80,000. Return on capital employed 15%. Calculate the value of goodwill on the basis of two years purchase of average super profits earned:a)Rs. 16,000b)Rs. 20,000c)Rs. 30,000d)Rs. 40,000Correct answer is option 'A'. Can you explain this answer?.
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