Goodwill Questions

The past average profits of a business work out at $\text{Rs. }20,000$ and it is expected that such profits are likely to continue for another three years. The value of goodwill based on the average profit method will be _________.

L and M are partners sharing profits in the ratio $3:2$. N is admitted as a partner for $\frac{1}{5}\text{th}$ of the share which is acquired entirely from L. Goodwill of the firm is valued at $\text{Rs. }40,000$ on N's admission. N will have to pay for Goodwill:

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: