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 of Super Profit Method.
Goodwill = Super Profits × Number of Years' Purchase.

Step 2: Sequence of calculation.
1. Calculate Average Profit → (C). 2. Calculate Normal Profit (Capital × Normal Rate of Return) → (B). 3. Calculate Super Profit (Average Profit – Normal Profit) → (A). 4. Multiply Super Profit by Years' Purchase → (D).

Step 3: Conclusion. Correct sequence = (C), (B), (A), (D).

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