Question

The steps involved in calculation of Goodwill under Super Profit Method are: (A) Calculate the super profits by deducting normal profit from the average profits.
(B) Calculate the normal profit on firm's capital using normal rate of return.
(C) Calculate the average profit.
(D) Calculate goodwill by multiplying super profits by given years' purchase.

• A. (A), (B), (C), (D)
• B. (A), (C), (B), (D)
• C. (C), (B), (A), (D)
• D. (C), (B), (D), (A)

Hint:

Super Profit Method = Average Profit → Normal Profit → Super Profit → Multiply by Years' Purchase.

Answer 1

The Correct Option is C

Step 1: Formula for the Super Profit Method.
Goodwill = Super Profits × Number of Years' Purchase.

Step 2: Calculation Steps.
1. Determine the Average Profit (C). 2. Calculate Normal Profit: (Invested Capital × Normal Rate of Return) (B). 3. Compute Super Profit: (Average Profit – Normal Profit) (A). 4. Calculate Goodwill: (Super Profit × Years' Purchase) (D).

Step 3: Order of Operations. The correct sequence is (C), (B), (A), (D).

Final Answer: \[\boxed{(C), (B), (A), (D)}\]