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Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be:
- a)Rs. 2,00,000
- b)Rs. 1,50,000
- c)Rs. 3,00,000
- d)Rs. 1,00,000
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000...
Ans.
Method to Solve :
Calculation of good will by
capitalisation* Average profit earned by the firm = Rs 1,00,000
* Capital employed = Asset – Liabilities |
= 10,00,000 – 1,80,000= 8,20,000
* Normal profit = capital employed* normal rate of return |
= 8,20,000* 10% = 82,000
* Super Profit = Average profit earned – Normal profit |
= 1,00,000- 82,000 = 18000
* Good will = Capitalisation of super profit = Super profit * 100/ Normal rate of return |
=18000*100/10 =Rs 1,80,000/-
Most Upvoted Answer
Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000...
Explanation:
To calculate the amount of goodwill as per the capitalization method, we need to use the formula:
Goodwill = (Super Profits / Normal Rate of Return) * 100
Let's break down the given information step by step:
1. Capital Employed: Rs. 1,50,000
- This refers to the total amount of capital invested in the business.
2. Profits: Rs. 50,000
- This is the profit earned by the business.
3. Normal Rate of Profit: 20%
- This is the expected rate of return on the capital employed. In this case, it is 20%.
4. Super Profits:
- Super Profits refer to the excess profit earned by the business over the normal rate of profit.
- Super Profits = Actual Profits - (Capital Employed * Normal Rate of Profit)
- Super Profits = Rs. 50,000 - (Rs. 1,50,000 * 20%)
- Super Profits = Rs. 50,000 - Rs. 30,000
- Super Profits = Rs. 20,000
5. Goodwill:
- Goodwill = (Super Profits / Normal Rate of Return) * 100
- Goodwill = (Rs. 20,000 / 20%) * 100
- Goodwill = Rs. 1,00,000
Therefore, the amount of goodwill as per the capitalization method is Rs. 1,00,000. Hence, option 'D' is the correct answer.
To calculate the amount of goodwill as per the capitalization method, we need to use the formula:
Goodwill = (Super Profits / Normal Rate of Return) * 100
Let's break down the given information step by step:
1. Capital Employed: Rs. 1,50,000
- This refers to the total amount of capital invested in the business.
2. Profits: Rs. 50,000
- This is the profit earned by the business.
3. Normal Rate of Profit: 20%
- This is the expected rate of return on the capital employed. In this case, it is 20%.
4. Super Profits:
- Super Profits refer to the excess profit earned by the business over the normal rate of profit.
- Super Profits = Actual Profits - (Capital Employed * Normal Rate of Profit)
- Super Profits = Rs. 50,000 - (Rs. 1,50,000 * 20%)
- Super Profits = Rs. 50,000 - Rs. 30,000
- Super Profits = Rs. 20,000
5. Goodwill:
- Goodwill = (Super Profits / Normal Rate of Return) * 100
- Goodwill = (Rs. 20,000 / 20%) * 100
- Goodwill = Rs. 1,00,000
Therefore, the amount of goodwill as per the capitalization method is Rs. 1,00,000. Hence, option 'D' is the correct answer.
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Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be:a)Rs. 2,00,000b)Rs. 1,50,000c)Rs. 3,00,000d)Rs. 1,00,000Correct answer is option 'D'. Can you explain this answer?
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Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be:a)Rs. 2,00,000b)Rs. 1,50,000c)Rs. 3,00,000d)Rs. 1,00,000Correct answer is option 'D'. 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 Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be:a)Rs. 2,00,000b)Rs. 1,50,000c)Rs. 3,00,000d)Rs. 1,00,000Correct answer is option 'D'. 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 Capital employed in a business is Rs. 1,50,000. Profits are Rs. 50,000 and the normal rate of profit is 20%. The amount of goodwill as per capitalization method will be:a)Rs. 2,00,000b)Rs. 1,50,000c)Rs. 3,00,000d)Rs. 1,00,000Correct answer is option 'D'. Can you explain this answer?.
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