Economics · Accounting for Goodwill
Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R. Assertion A: Under the Super Profits Method of valuing goodwill, normal profits are deducted from average profits to find the 'super profits', which are then multiplied by a specified number of years' purchase. Reason R: The Super Profits Method assumes that a buyer's actual benefit stems from the total profits expected to be generated in the initial years of a new business, rather than from profits exceeding the normal return. In the light of the above statements, choose the most appropriate answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is not correct but R is correct
- 2A is correct but R is not correct✓
- 3Both A and R are correct but R is NOT the correct explanation of A
- 4Both A and R are correct and R is the correct explanation of A
Correct answer
A is correct but R is not correct
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