Question

11. The total profits of a firm for the last 5 years are Rs. 30,000. Calculate the value of goodwill of the firm if it is based on 3 years purchase of the average profits. (a) Rs. 12000 (b) Rs. 20000 (c) Rs. 18000 (d) Rs. 10000​

Answer 1

Given: The total profits of a firm for the last 5 years are Rs 30,000.

To find: The goodwill of the firm, if it is based on 3 years' purchase of the average profits.

Answer:

Average profit = Total profit ÷ Number of years

• Total profit = Rs 30,000
• Number of years = 5

Average profit = Rs 30,000 ÷ 5

Average profit = Rs 6,000

Goodwill = Average profit × Number of years' purchase

• Average profit = Rs 6,000
• Number of years' purchase = 3

Goodwill = Rs 6,000 × 3

Goodwill = Rs 18,000

Therefore, the goodwill of the firm based on 3 years' purchase of the average profits for the last 5 years is (c) Rs 18,000.

Answer 2

Answer:

(C) 18,000

Explanation:

Question:-

• The total profits of a firm for the last 5 years are Rs. 30,000. Calculate the value of goodwill of the firm if it is based on 3 years purchase of the average profits

Given Datas:-

• The total profits of a firm for the last 5 years are Rs. 30,000

• Calculate the value of goodwill of the firm if it is based on 3 years purchase of the average

Require to find:-

• Value of goodwill

Solution:-

Goodwill = Average profit × no: of year purchases

Average profit =   $\frac{Sum of profits }{No: of years}$

Average profit = $\frac{30,000}{5}$ =  $6,000$

No; of year purchases = 3

Good will is based on 3 year purchased of average profit

Goodwill = 6,000 × 3 = 18,000