when we are calculating goodwill of a company, we calculate capital employed for determining normal profit.
normally we use average capital employed but some time we use closing capital employed.
in which situation we use closing capital employed??
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calculation of capital employed
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Average capital employed = (Opening capital emploted + Closing Capital employed) / 2
= Opening capital employed + (Current year profit after Tax) X 50%
= Closing capital employed - (Current year profit after Tax) X 50%
Current year profit = Changes in reserves and surplus
Average capital employed cannot be calculated in the absensce of details about profits for the current year. Since current year profits has not been given in the question, Goodwill has been calculated on the basis of closing capital employed
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