You are required to calculate the value of goodwill based on 3 years’ purchase of the super profits…

Model: Super profits method The books of the business showed that the capital employed on 31 March 2010, Rs.6,00,000 and the profits for the last 5 years were:

Years

2005–06:

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50,000

2006–07:

60,000

2007–08:

70,000

2008–09:

80,000

2009–10:

1,40,000

You are required to calculate the value of goodwill based on 3 years’ purchase of the super profits of the business, given that the normal rate of return is 10%.

 

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