Aayush and Aarushi are partners sharing profits and losses

26 :- Aayush and Aarushi are partners sharing profits and losses in the ratio of 3:2. They admitted Naveen into partnership for 1/4th share. Goodwill of the firm was to be valued at three years purchase of super profits. Average net profit of the firm was Rs 20,000. Capital investment in the business was Rs 50,000 and normal rate of return was 10%.
Calculate the amount of goodwill premium brought by Naveen.

Solution:-
Calculation of goodwill of the firm
Normal profit = Capital employed x Normal rate of return
= 50,000 x 10%
= Rs 5,000

Super profit = Average profit – Normal profit
= 20,000 – 5,000
= Rs 15,000

Goodwill = Super profit x No. of years purchased
= 15,000 x 3
= Rs 45,000

Calculation of the Amount of premium of goodwill brought in by Naveen
Premium of goodwill by Naveen = 45,000 x 1/4 = Rs 11,250