Rajan and Rajini are partners in a firm

35 :-  Rajan and Rajini are partners in a firm. Their capitals were Rajan Rs 3,00,000: Rajini Rs 2,00,000. During the year ended 31^st March, 2024, the firm earned a profit of Rs 1,50,000. Calculate the value of goodwill of the firm by capitalization of super profit assuming that the normal rate of return is 20%.

Solution:- Calculation of Normal profits
Normal profits = Capital employed x Normal rate of return
                        = 5,00,000 x 20%
                       = Rs 1,00,000

Calculation of Super profits
Super profit = Average profit – Normal profits
                    = 1,50,000 – 1,00,000
                   = Rs 50,000

Calculation of Goodwill of the firm
Goodwill = Super profit/Normal rate of return
               = 50,000 x 100/20
               = Rs 250,000