From the following particulars, calculate goodwill on the basis of 3 years purchase of super profits: (i) Capital employed: ₹50,000 (ii) Trading profit (after tax): 2011: ₹12,200, 2012: ₹15,000, 2013: ₹2,000 (loss), 2014

Average Profit for 4 years ₹ 2011 12,200 2012 15,000 2013 (2,000) 2014 21,000 Total 46,200 Average Profit (Total Profit/4) 11,550 Calculation of Super Profits ₹ Average Profits 11,550 Less: Alternative Income or (Estimated cost of owners remuneration) 3,600 Average Trading Profit 7,950 Less: Normal Profit @ 10% on ₹50,000 5,000 Super Profits 2,950 Goodwill on 3 years purchase of super profits (2,950 x 3) 8,850 Alternative Answer 2(e) (Ignoring the year 2013 as it was abnormal year) Average Profit for 3 years ₹ 2011 12,200 2012 15,000 2014 21,000 Total 48,200 Average Profit (Total Profit/3) 16,067 Calculation of Super Profits ₹ Average Profits 16,067 Less: Alternative Income or (Estimated cost of owners remuneration) 3,600 Average Trading Profit 12,467 Less: Normal Profit @ 10% on ₹50,000 5,000 Super Profits 7,467 Goodwill on 3 years purchase of super profits (7,467 x 3) 22,400