The balance sheet of ABC Ltd. on 31 March 2010 is as follows:
|
Liabilities |
Assets |
||
|
15,0008% |
1,50,000 |
Goodwill |
30,000 |
|
Preference |
Fixed Assets |
5,40,000 |
|
|
Shares of Z10 |
investment (5% |
60,000 |
|
|
Each |
Govt Loan) |
||
|
30,000 Equity |
3,00,000 |
Current Assets |
3,00,000 |
|
Shares of Z10 |
Preliminary |
30,000 |
|
|
Each |
Expenses |
||
|
Reserves (including |
3,00,000 |
Discount on debentures |
15,000 |
|
Provisions for |
|||
|
Taxation |
|||
|
T 30,000) |
|||
|
8% Debentures |
1,50,000 |
||
|
Creditors |
75,000 |
||
|
9,75,000 |
9,75,000 |
The average profit of the company (after deducting interest on debentures and taxes) is 90,000. The market value of the machinery included in fixed assets is Rs.15,000 more. Expected rate of return is 10%. Evaluate the goodwill of the company at 5 times of the super profit. [Model: Super profit method (Capitalization of super profit method)]