From the following information, calculate value of goodwill of the firm:
(i) At three years purchase of Average Profit.
(ii) At three years purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average profit. Information:
(a) Average Capital Employed is Rs. 6,00,000.
(b) Net Profit/(Loss) of the firm for the last three years ended are: 31st March, 2108 – Rs.2,00,000, 31st March, 2107 – Rs. 1,80,000, and 31st March, 2106 – Rs. 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of Rs. 1,00,000 to partners is to be taken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and nottrade investments) is Rs.7,00,000 whereas Partners Capital is Rs. 6,00,000 and Outside Liabilities Rs. 1,00,000.
