Pran and Ron were partners in a firm with a combined capital of ₹ $\displaystyle 3,00$,000. The normal rate of return was $\displaystyle 15$%. The profits of the last four years were as follows : < $\displaystyle 2019$ $\displaystyle 20$ $\displaystyle 50,000$ $\displaystyle 2020$ $\displaystyle 21$ $\displaystyle 90,000$ $\displaystyle 2021$ $\displaystyle 22$ $\displaystyle 80,000$ $\displaystyle 2022$ $\displaystyle 23$ $\displaystyle 70,000$ The closing stock for the year $\displaystyle 2022$ $\displaystyle 23$ was undervalued by ₹ $\displaystyle 10$,000. Calculate goodwill of the firm based on capitalisation of super profit.

Calculation of Normal Adjusted Profit Year Profit (₹) Adjustment (₹) Adjusted Profit (₹) $\displaystyle 2019$-$\displaystyle 20$ $\displaystyle 50,000$ - $\displaystyle 50,000$ $\displaystyle 2020$-$\displaystyle 21$ $\displaystyle 90,000$ - $\displaystyle 90,000$ $\displaystyle 2021$-$\displaystyle 22$ $\displaystyle 80,000$ - $\displaystyle 80,000$ $\displaystyle 2022$-$\displaystyle 23$ $\displaystyle 70,000$ $\displaystyle 10,000$ $\displaystyle 80,000$ TOTAL $\displaystyle 3,00,000$ Average Profit= (Total Adjusted Profit)/ No. of years = $\displaystyle 3,00,000$/$\displaystyle 4$ = ₹$\displaystyle 75,000$ Normal Profit= Capital Employed x Normal Rate of Return $\displaystyle 100$ = $\displaystyle 3,00,000$ x $\displaystyle 15$ = ₹$\displaystyle 45,000$ $\displaystyle 100$ Super Profit = Average Profit – Normal Profit = $\displaystyle 75,000$ - $\displaystyle 45,000$ = ₹$\displaystyle 30,000$ Goodwill= Super Profit x $\displaystyle 100$ Normal Rate of Return = $\displaystyle 30,000$ x $\displaystyle 100$ $\displaystyle 15$ = ₹$\displaystyle 2,00,000$