29 :- From the following particulars, calculate the value of goodwill of a firm by Capitalisation of average profit method :-
(i) Profits of last five consecutive years ending 31st march are :-
2025 – Rs 54,000; 2024 – Rs 42,000; 2023 – Rs 39,000; 2022 – Rs 67,000 and 2021 – Rs 59,000
(ii) Capitalization rate 20%
(iii) Net assets of the firm Rs 2,00,000.

Solution:-

Calculation of Average profit
Average profit = 54,000 + 42,000 + 39,000 + 67,000 + 59,000/5
                        = 2,61,000/5
                       = Rs 52,200

Calculation of Capitalized value of the firm
Capitalized value of the firm = Average profit/Normal rate of return
                                              = 52,200 x 100/20
                                              = Rs 2,61,000

Calculation of Goodwill
Goodwill = Capitalized value of the firm – Capital employed
                = 2,61,000 – 2,00,000
                = Rs 61,000