Question

1. The following were the profit of a business firm:
2012 Rs.60,000 (including an abnormal gain Rs.15,000)
2013 Rs.1,20,000 (after charging an abnormal loss Rs.30,000)
2014 Rs.1,26,000 (excluding Rs.6,000 as insurance premium of property now to be
insured)
Calculate firm's goodwill at two year's purchase of the average profit of the last three
years. ​

Answer 1

Answer:

Rs. 2,10,000

Explanation:

For 2012, Adjusted Normal Profit = Rs. 60,000 - Abnormal gain of Rs. 15,000

= Rs. 45,000.

For 2013, Adjusted Normal Profit = Rs. 1,20,000 + Abnormal Loss of Rs. 30,000

= Rs. 1,50,000

For 2014, Adjusted Normal Profit = Rs. 1,26,000 - Expense of Rs. 6,000

= Rs. 1,20,000

Total Adjusted Normal Profit for 3 years = Rs. 45,000 + Rs. 1,50,000 + Rs. 1,20,000

= Rs. 3,15,000

Therefore Average Normal Adjusted Profit = 3,15,000/3

= Rs. 1,05,000

Given number of years purchase = 2 years

Hence, Goodwill = 2*1,05,000 = Rs. 2,10,000