Question

12. Following information is available about the business of a firm :
(i) Profits : In 2013, Rs 40,000; In 2014, Rs 50,000; In 2015, Rs 60,000, (ii) Non-recurring income of Rs 1,000 is included in the profits of 2014, (iii) Profits of 2013 have been reduced by Rs 6,000 because goods were destroyed by fire, (iv) Goods have not been insured but it is thought to insure them in future. The insurance premium is estimated at Rs 400 per year, (v) Reasonable remuneration of the proprietor of business is Rs 6,000 per year, but it has not been taken into account for calculation of above mentioned profits, (vi) Profits of 2015 include Rs 5,000 income on investment.
Goodwill is agreed to be valued at two year's purchase of the weighted average profits of the past three years. The appropriate weights to be used are :
2013 :- 1; 2014 :—2; 2015 :-3.
[Ans. V​

Answer 1

Answer:

Explanation:

The Valuation of Goodwill is based on future maintainable profit (FMP)

FMP= Profit

Adjustment of profit

In 2013 : 40000 + 6000 - 400 - 6000 = 39600

In 2014 :  50000 - 4000 - 400 - 6000 = 39600

In 2015 : 60000 - 400 -6000 - 5000 = 48600

Average profit = 39600 + 39600 + 48600=  127800 / 3

= 42600

Goodwill =  42600 * 2 =85200

Answer 2

Answer:

goodwill at 2 year's purchase = ₹ 45100 × 2

= ₹ 90200