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Question
Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs. 3,00,000; Rajani Rs. 2,00,000. During the year 2015 the firm earned a profit of Rs. 1,50,000. Calculate the value of goodwill of the firm assuming that the normal rate of return is 20%?
Solution
| Rajan’s Capital | 3,00,000 |
| Rajni’s Capital | 2,00,000 |
| Total Capital Employed |
5,00,000 |
Normal Rate of Return = 20%
Capitalised Valued = Actual Profit × `100/"Normal Rate of Return"`
= 1,50,000 × `100/20`
= Rs 7,50,000
Goodwill = Capitalised Value − Capital Employed
= 7,50,000 − 5,00,000
= Rs 2,50,000
Alternative Method
Normal Profit = Capital Employed × `"Normal Rate of Return"/100`
= 5,00,000 × `20/100`
= Rs 1,00,000
Super profit = Actual Profit − Normal Profit
= 1,50,000 − 1,00,000
= Rs 50,000
Goodwill = Super Profit × `100/"Normal Rate of Return"`
= 50,000 × `100/20`
= Rs 2,50,000
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