SOLUTION (i) Ascertain super profits by subtracting normal profits from average profits; (ii) Calculate goodwill by multiplying super profits with number of years’ purchase.
SOLUTION First of all, Capitalised value of Average Profits is calculated as per thefollowing formula;Capitalised value of Average Profits = Average Profits x 100 / Normal Rate of ReturnThereafter, Goodwill…
SOLUTION Under this method, first, super profits are calculated by deducting normal profit from the average profit and then goodwill is calculated by multiplying the super profits by the given…
SOLUTION Super Profit is the excess of actual average profits over normal profits.
SOLUTION (i) Favorable Location of the Business; (ii) Efficiency of Management.
SOLUTION Under this method normal past profits of the business for a number of years are totalled and average is calculated. Goodwill is then calculated by multiplying the average profits…
SOLUTION (i)It is an intangible asset not a fictitious asset. It is a valuable asset; (ii) It is helpful in earning excess profits.
SOLUTION Goodwill is the value of the reputation of a firm in respect of the profits expected in future over and above the normal profits earned by other similar firms…
SOLUTION (i) At the time of retirement of a partner. (ii) At the time of change in profit sharing ratio of existing partners.