Calculate the Average Actual Profit.

Step 1: Calculate the Average Actual Profit. The profits and losses for the previous years are: 2017 Profit: ₹ 5,000 2018 Loss: ₹ 8,500 2019 Profit: ₹ 25,000 2020 Profit: ₹ 37,500 Total Profit = 5,000 - 8,500 + 25,000 + 37,500 = 59,000 Average Actual Profit = (59,000)/(4) = 14,750 Step 2: Adjust the Average Actual Profit for proprietor's remuneration. The remuneration from alternative employment of the proprietor is ₹ 3,000 p.a. This is a normal expense and should be deducted from the average actual profit. Adjusted Average Actual Profit = 14,750 - 3,000 = 11,750 Step 3: Calculate the Normal Profit. The average Capital Employed is ₹ 1,00,000. The normal rate of return is not explicitly stated in the question. We will assume a Normal Rate of Return of 10%, which is common in such problems. Normal Profit = Average Capital Employed × Normal Rate of Return Normal Profit = 1,00,000 × (10)/(100) = 10,000 Step 4: Calculate the Super Profit. Super Profit is the excess of Adjusted Average Actual Profit over Normal Profit. Super Profit = Adjusted Average Actual Profit - Normal Profit Super Profit = 11,750 - 10,000 = 1,750 Step 5: Calculate Goodwill. Goodwill is to be calculated on the basis of 3 years' purchases of Super Profits. Goodwill = Super Profit × Number of years' purchases Goodwill = 1,750 × 3 = 5,250 The value of goodwill is ₹ 5,250. Send me the next one 📸