A firm's average profit is Rs. 80,000 and its normal profit is Rs. 60,000. If goodwill is valued at three years' purchase of super profit, what is its value?
Correct answer: A. Rs. 60,000
- A. Rs. 60,000
- B. Rs. 80,000
- C. Rs. 140,000
- D. Rs. 180,000
Explanation
Super profit is Rs. 20,000, calculated as average profit minus normal profit. Goodwill is therefore Rs. 20,000 multiplied by three, giving Rs. 60,000.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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