Question
Mr. Wiseman has invested a sum of Rs. 2,00,000 in his own business which is a very profitable one. The annual profit earned from his
Mr. Wiseman has invested a sum of Rs. 2,00,000 in his own business which is a very profitable one. The annual profit earned from his business is Rs. 45000 which includes a sum of Rs 10,000 received as compensation of a part of his business premises. As an alternative to his engagement in his business, he could have invested the money in long term deposit with Bank earning a normal rate of interest of 10% and also could engage himself in employment thereby getting an annual salary of Rs 7200. Considering 2% as fair compensation for the risk involved in the business, calculate the value of goodwill of his business on capitalization of super profits at the normal rate of interest. Ignore taxation.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
7th Edition
978-0-538-4527, 0-538-45274-9, 978-1133161646
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