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Illustration 4 (1) Profits earned for three years: 2013-14 $ 2,00,000; 2014-15 $ 2,40,000; 2015-16 $ 2,20,000. Normal rate of return 10% Capital employed $
Illustration 4 (1) Profits earned for three years: 2013-14 $ 2,00,000; 2014-15 $ 2,40,000; 2015-16 $ 2,20,000. Normal rate of return 10% Capital employed $ 12,00,000 (iv) Present value of an annuity of one rupee for 5 years at 10% = 3.78 (v) Profits of 2014-15 included non-recurring income on an average basis of $ 6,000. (vi) Profit of 2013-14 is reduced by 10,000 due to stock destroyed by fire. (vii) Profit of 2015-16 include income from investment $ 4,000. (viii) During 2014-15 closing stock was under valued by $ 10,000. (ix) The stock is not insured and it is thought prudent to insure the stock in future. The insurance premium is estimated at $3,000 p.a. You are required to calculate the value of goodwill: (a) As per 5 years' purchase of super profits. (b) As per annuity method (c) As per capitalisation method by using Average Capital Employed
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