A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return for a similar business is 10%. Ascertain - Accountancy MCQ CUET Accountancy 2025 30 May Shift 2 2026 | ExamTest.live

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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 for a similar business is 10%. Ascertain the value of goodwill by capitalization of average profits method, given that the value of net assets of the business is Rs. 8,20,000.

Solution & Step-by-step Explanation

1. Calculate the Capitalised Value of Average Profits: Capitalised Value = Average Profit \times \frac{100}{Normal Rate of Return} Capitalised Value = 1, 00, 000 \times \frac{100}{10} = Rs. 10, 000, 00 Net Assets (Capital Employed) is given as Rs. 8,20,000.Calculate Goodwill: Goodwill = Capitalised Value of Average Profit - Net Assets Goodwill = 10, 00, 000 - 8, 20, 000 = Rs. 1, 80, 000

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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 for a similar business is 10%. Ascertain the value of goodwill by capitalization of average profits method, given that the value of net assets of the business is Rs. 8,20,000.

Rs. 1,75,000

Rs. 1,80,000

Rs. 1,90,000

Rs. 1,85,000

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