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A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in a similar business is 10%. Ascertain the value of goodwill by capitalisation of super profits method, given that the value of net assets of the business is Rs.8,20,000.

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Goodwill = super profit × 100/ Normal rate of return 

Super profit = Actual/Average profit – Normal profit 

Normal profit = Capital employed × Normal rate of return = 820000 × 10/100 = 82000 

Super profit = 100000 – 82000 = 18000 

Goodwill = 18000 × 100/10 = Rs. 180000.

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