admission of a partner - super profit method in valuation of non-purchased goodwill

8/13/2019 Admission of a Partner - Super Profit Method in Valuation of Non-Purchased Goodwill

1/5


2/5

http://www.tutorsonnet.com/finance-homework-help.php Page 1

Admission of a Partner - Super Profit Method in Valuation of Non-

Purchased Goodwill:

Super Profit is the addition of original profit over the normal profit of

an organization. An ordinary method of valuation of goodwill is the

super profit method.

A business organization may process some advantages which facilitate

it to make additional profits over and above the amount that would

grossed if the capital of the business organization was devotedelsewhere with like jeopardy.

These additional profits usually expressed as super profits, can be

esteemed and goodwill is the worth of the few years purchase of super

profit.

Under this method, super profits are considered as the basis for

computing goodwill in place of average profit. Similar to the previous

method, that is average profit method, this value is also calculated by

applying a traditional rule suitable in the trade for instance, three to

four years purchase of super profit.

For computing goodwill the below steps are followed:

Step 1: The amount of capital invested is computed.

Step 2: The normal return by increasing capital


3/5


Invested with normal rate of return:

Step 3: The average maintainable profit of the firm is to be computed.

Step 4: The difference between the average maintainable profit and

normal return as computed above is calculated. The difference is

termed as Super Profit if the value is positive.

Step 5: Product of super profit and the number of years purchase is

computed. The resultant figure will be the goodwill.

X and Y are equal partners. They decide upon to admit Z for an equal

share. For the purpose of admission of Z, the goodwill of the firm to be

valued at 4 years purchase of super profit. The capital invested in the

firm is $50,000. The normal rate of return may be taken as 10% per

annum. Average maintainable profit of the firm is $7,500. Compute the

value of the goodwill.

ILLUSTRATION


4/5


Capital Invested is $50,000,

Normal return = $50,000 x 10% = $5,000

Average maintainable profit is $7,500

Super Profit = $7,500 - $5,000 = $2,500;

the value of goodwill = $2,500 x 4 = $10,000

SOLUTION


5/5

For More Details:

Website:http://www.tutorsonnet.com

Mail Us:[email protected]

Phone: +91 98803 85500

List of Subjects which we Provide Homework Help:

1 Accounting 9 C 17 JavaScript

2 Finance 10 Visual Basic 18 Shell Scripting

3 Statistics 11 C# (C Sharp) 19 Math

4 Economics 12 Matlab Programming 20 Chemistry

5 Operations 13 Database 21 Physics

6 Marketing 14 ER Diagrams 22 Dissertations

7 Java 15 Oracle 23 Case Study

8 C++ 16 Microsoft (MS) Access 24 Project Management
http://www.tutorsonnet.com/http://www.tutorsonnet.com/http://www.tutorsonnet.com/mailto:[email protected]:[email protected]:[email protected]://www.tutorsonnet.com/accounting-homework-help.phphttp://www.tutorsonnet.com/accounting-homework-help.phphttp://www.tutorsonnet.com/c-programming-homework-help.phphttp://www.tutorsonnet.com/c-programming-homework-help.phphttp://www.tutorsonnet.com/javascript-homework-help.phphttp://www.tutorsonnet.com/javascript-homework-help.phphttp://www.tutorsonnet.com/finance-homework-help.phphttp://www.tutorsonnet.com/finance-homework-help.phphttp://www.tutorsonnet.com/visual-basic-programming-homework-help.phphttp://www.tutorsonnet.com/visual-basic-programming-homework-help.phphttp://www.tutorsonnet.com/shell-scripting-homework-help.phphttp://www.tutorsonnet.com/shell-scripting-homework-help.phphttp://www.tutorsonnet.com/statistics-homework-help.phphttp://www.tutorsonnet.com/statistics-homework-help.phphttp://www.tutorsonnet.com/csharp-programming-homework-help.phphttp://www.tutorsonnet.com/csharp-programming-homework-help.phphttp://www.tutorsonnet.com/math-homework-help.phphttp://www.tutorsonnet.com/math-homework-help.phphttp://www.tutorsonnet.com/economics-homework-help.phphttp://www.tutorsonnet.com/economics-homework-help.phphttp://www.tutorsonnet.com/matlab-programming-homework-help.phphttp://www.tutorsonnet.com/matlab-programming-homework-help.phphttp://www.tutorsonnet.com/chemistry-homework-help.phphttp://www.tutorsonnet.com/chemistry-homework-help.phphttp://www.tutorsonnet.com/operations-management-homework-help.phphttp://www.tutorsonnet.com/operations-management-homework-help.phphttp://www.tutorsonnet.com/database-homework-help.phphttp://www.tutorsonnet.com/database-homework-help.phphttp://www.tutorsonnet.com/physics-homework-help.phphttp://www.tutorsonnet.com/physics-homework-help.phphttp://www.tutorsonnet.com/marketing-homework-help.phphttp://www.tutorsonnet.com/marketing-homework-help.phphttp://www.tutorsonnet.com/dbms-homework-help.phphttp://www.tutorsonnet.com/dbms-homework-help.phphttp://www.tutorsonnet.com/dissertation-writing-help.phphttp://www.tutorsonnet.com/dissertation-writing-help.phphttp://www.tutorsonnet.com/java-programming-homework-help.phphttp://www.tutorsonnet.com/java-programming-homework-help.phphttp://www.tutorsonnet.com/oracle-homework-help.phphttp://www.tutorsonnet.com/oracle-homework-help.phphttp://www.tutorsonnet.com/case-study-homework-help.phphttp://www.tutorsonnet.com/case-study-homework-help.phphttp://www.tutorsonnet.com/c++-programming-homework-help.phphttp://www.tutorsonnet.com/c++-programming-homework-help.phphttp://www.tutorsonnet.com/microsoft-access-homework-help.phphttp://www.tutorsonnet.com/microsoft-access-homework-help.phphttp://www.tutorsonnet.com/project-management-homework-help.phphttp://www.tutorsonnet.com/project-management-homework-help.phphttp://www.tutorsonnet.com/project-management-homework-help.phphttp://www.tutorsonnet.com/microsoft-access-homework-help.phphttp://www.tutorsonnet.com/c++-programming-homework-help.phphttp://www.tutorsonnet.com/case-study-homework-help.phphttp://www.tutorsonnet.com/oracle-homework-help.phphttp://www.tutorsonnet.com/java-programming-homework-help.phphttp://www.tutorsonnet.com/dissertation-writing-help.phphttp://www.tutorsonnet.com/dbms-homework-help.phphttp://www.tutorsonnet.com/marketing-homework-help.phphttp://www.tutorsonnet.com/physics-homework-help.phphttp://www.tutorsonnet.com/database-homework-help.phphttp://www.tutorsonnet.com/operations-management-homework-help.phphttp://www.tutorsonnet.com/chemistry-homework-help.phphttp://www.tutorsonnet.com/matlab-programming-homework-help.phphttp://www.tutorsonnet.com/economics-homework-help.phphttp://www.tutorsonnet.com/math-homework-help.phphttp://www.tutorsonnet.com/csharp-programming-homework-help.phphttp://www.tutorsonnet.com/statistics-homework-help.phphttp://www.tutorsonnet.com/shell-scripting-homework-help.phphttp://www.tutorsonnet.com/visual-basic-programming-homework-help.phphttp://www.tutorsonnet.com/finance-homework-help.phphttp://www.tutorsonnet.com/javascript-homework-help.phphttp://www.tutorsonnet.com/c-programming-homework-help.phphttp://www.tutorsonnet.com/accounting-homework-help.phpmailto:[email protected]://www.tutorsonnet.com/

admission of a partner - super profit method in valuation of non-purchased goodwill

Documents