In D K Goel Chapter 1, Illustration 18(HOTS) (d) part, Can we take average capital employed to calculate goodwill on - Accountancy - Reconstitution- Change in Existing Profit Sharing Ratio

Question

In D K Goel Chapter 1, Illustration 18(HOTS) (d) part, Can we take
average capital employed to calculate goodwill on the basis of
capitalisation of average profits instead of net assets?? Why or
why not with reason

Nikhil Sehgal · Accepted Answer

Tanya,
No this cannot be done The reason for this is quite simple both the
things Net Worth/Assets and the Average Capital Employed are two
different things Average Capital Employed is basically mean value
of opening capital employed and closing capital employed This value
is different from the value of net assets/net worth/ capital
employed at the end So, I believe it must be now clear to you which
value we have to use while ascertaining goodwill by capitalisation
of average profits method

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In D K Goel Chapter 1, Illustration 18(HOTS) (d) part, Can we take average capital employed to calculate goodwill on the basis of capitalisation of average profits instead of net assets?? Why or why not with reason.