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Problem 1.4 (capitalisation Method). Ascertain the value of goodwill of P.Co. Ltd. Carrying on business as retail traders from the following information according to Capitalisation method: BALANCE SHEET As on 31st December, 2015 $ I. Equity and Liabilities (1) Shareholders' Funds (a) Share Capital: 2,500 Shares of 100 each 2,50,000 (b) Reserves and Surplus: Surplus Account 56,650 (2) Current Liabilities Bank Overdraft 58,350 Sundry Creditors 90,500 Provision for Taxation 19,500 Total Equity and Liabilities 4,75,000 IL Assets (1) Non-current Assets Fixed Assets : Land & Building at Cost 1,10,000 Plant & Machinery at Cost less Depreciation 1,00,000 Intangible Asset : Goodwill 25,000 (2) Current Assets Stock at Cost 1,50,000 Book Debts less Provision for Doubtful Debts 90,000 Total Assets 4,75,000 The company commenced operations in 2011 with a paid up capital as aforesaid of $ 2,50,000. The profits earned, before providing for taxation, have been as: 2011 $ 61,000; 2012 $64,000; 2013 $ 71,500 ; 2014 $ 78,000 and 2015 $ 85,000. You may assume that income tax at the rate of 50% has been payable on these profits. The average dividend paid by the company for the four years is 10% which is taken as reasonable return expected on the capital invested in the business

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