Arrange the steps in proper sequence to calculate Goodwill through the Super Profits Method.(A) Calculate the normal profit on the firm's capital on the basis of the normal rate of return.(B) Calculate the average profit.(C) Calculate the super profits by deducting normal profit from the average profits.(D) Multiply super profits by the given number of years purchased.Choose the correct answer from the options given below:
- A(A), (B), (C), (D)
- B(A), (B), (D), (C)
- C(B), (A), (C), (D)
- D(B), (A), (D), (C)
Solution & Step-by-step Explanation
The structured execution steps to evaluate goodwill under the Super Profit Method are:Step 1 (B): Calculate the actual Average Profit of the business.Step 2 (A): Calculate the Normal Profit using Capital Employed ().Step 3 (C): Deduct Normal Profit from Average Profit to arrive at the Super Profit ().Step 4 (D): Multiply Super Profit by the number of years' purchase to compute Goodwill.Thus, the sequence is (B), (A), (C), (D).