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The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.?
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The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ ...
Calculation of Goodwill as per Capitalisation of Super Profits
Given data:
Net assets of the firm including fictitious assets = ₹ 85,000
Net liabilities of the firm = ₹ 30,000
Normal rate of return = 10%
Average profit of the firm = ₹ 80,000
Step 1: Calculation of Capitalized Value of Average Profits
Capitalized Value of Average Profits = Average Profits / Normal Rate of Return
= 80,000 / 10%
= ₹ 8,00,000
Step 2: Calculation of Value of Net Assets
Value of Net Assets = Net Assets - Fictitious Assets - Net Liabilities
= 85,000 - 5,000 - 30,000
= ₹ 50,000
Step 3: Calculation of Goodwill
Goodwill = Capitalized Value of Average Profits - Value of Net Assets
= 8,00,000 - 50,000
= ₹ 7,50,000
Explanation:
Goodwill is an intangible asset that represents the excess of the purchase price of a business over the fair value of its identifiable assets and liabilities. The concept of goodwill as per capitalisation of super profits is used to calculate the value of goodwill based on the average profits of the firm that are in excess of the normal rate of return.
In this case, the normal rate of return is 10% and the average profit of the firm is ₹ 80,000. The capitalized value of average profits is calculated by dividing the average profits by the normal rate of return. The value of net assets is calculated by subtracting the fictitious assets and net liabilities from the net assets.
Finally, the value of goodwill is calculated by subtracting the value of net assets from the capitalized value of average profits. In this case, the goodwill as per capitalisation of super profits is ₹ 7,50,000.
Overall, the calculation of goodwill as per capitalisation of super profits is a crucial aspect of valuing a business and is based on the excess earnings of the firm over the normal rate of return.
Given data:
Net assets of the firm including fictitious assets = ₹ 85,000
Net liabilities of the firm = ₹ 30,000
Normal rate of return = 10%
Average profit of the firm = ₹ 80,000
Step 1: Calculation of Capitalized Value of Average Profits
Capitalized Value of Average Profits = Average Profits / Normal Rate of Return
= 80,000 / 10%
= ₹ 8,00,000
Step 2: Calculation of Value of Net Assets
Value of Net Assets = Net Assets - Fictitious Assets - Net Liabilities
= 85,000 - 5,000 - 30,000
= ₹ 50,000
Step 3: Calculation of Goodwill
Goodwill = Capitalized Value of Average Profits - Value of Net Assets
= 8,00,000 - 50,000
= ₹ 7,50,000
Explanation:
Goodwill is an intangible asset that represents the excess of the purchase price of a business over the fair value of its identifiable assets and liabilities. The concept of goodwill as per capitalisation of super profits is used to calculate the value of goodwill based on the average profits of the firm that are in excess of the normal rate of return.
In this case, the normal rate of return is 10% and the average profit of the firm is ₹ 80,000. The capitalized value of average profits is calculated by dividing the average profits by the normal rate of return. The value of net assets is calculated by subtracting the fictitious assets and net liabilities from the net assets.
Finally, the value of goodwill is calculated by subtracting the value of net assets from the capitalized value of average profits. In this case, the goodwill as per capitalisation of super profits is ₹ 7,50,000.
Overall, the calculation of goodwill as per capitalisation of super profits is a crucial aspect of valuing a business and is based on the excess earnings of the firm over the normal rate of return.
Community Answer
The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ ...
Aseet=85000-5000 , liability =30000 capital =50000 normal profit= 5000 average profit =80000 super profit =75000 goodwill 75000×100÷10=750000
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The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.?
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The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? 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 net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.?.
The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? 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 net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.?.
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The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.?, a detailed solution for The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? has been provided alongside types of The net assets of a firm including fictitious assets of ₹ 5,000 are ₹ 85,000. The net liabilities of the firm are ₹ 30,000. The normal rate of return is 10% and the average profit of the firm is ₹80,000. Calculate the goodwill as per capitalisation of super profits.? theory, EduRev gives you an
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