Average net profit before adjustments is INR 5,14,000. Profit includes interest at 8% on non-trading investments. Cost of these investments is INR 1,98,200 while the face value is INR 2,00,000. Expenses amounting to INR 7,000 per annum are likely to be discontinued in future. The provision for income-tax to be made at 30%. Normal rate of return may be taken at 10%. Average capital employed in the business ( including investments) is INR 18,98,200. Assuming 4 years purchase of super-profits, what is the value of goodwill ?
May 05, 2020
Next post
Average net profit of a business as adjusted for valuation of goodwill amounted to INR 2,35,000. Net tangible assets employed were of the value of INR 4,50,000. But upon valuation, they amounted to INR 15,00,000. Assuming that 10% represented a fair commercial return, value of goodwill by capitalizing super profits will be-
Preparing for exams or just wish to upgrade your knowledge
Get access to interactive practice tests and can be attempted multiple times.
Disclaimer
All academic material provided in this website by way of quiz or otherwise is derived from various sources, reference of which is given below. The objective is to provide such information or exercises is purely for academic purpose. MPPL is not the creator of such information since they are derived from the statutes, laws, rules, regulations, notifications or circulars issued by the government authorities or judgments of courts of law under relevant laws. While MPPL is only collating such information, it does not claim any exclusive copyright thereon except the manner in which it is being presented. The user understands that some situational questions can have different views and opinions which may not necessarily match with what the answer keys provide. MPPL does not vouch for or guarantee the accuracy or dependability of the answer key. Nor shall it be liable for any suits, prosecution, proceedings, actions, damages based on the academic information provided here. The responsibility to cross-check and verify the veracity of the information provided here rests upon the user and visitor of the website.
MPPL has taken all reasonable precautions for not violating anyone else’s copyright or intellectual property right and believes. However, in case someone still feels that any of the content provided here was subject to their copyright, such person is requested to get in touch with MPPL on its email id a pratima@mangalamjobs.com and necessary remedial measures can be undertaken without prejudice to MPPL.