Question

15. Raman and Daman are partners sharing profits in the ratio of 60:40 and for the last four years they have
been getting annual salaries of 50,000 and 40,000 respectively. The annual accounts have shown the
following net profit before charging partners' salaries:
Year ended 31st March, 2017 - 1,40,000; 2018- 1,01,000 and 2019— 1,30,000.
On 1st April 2019, Zeenu is admitted to the partnership for 1/4th share in profit (without any salary).
Goodwill is to be valued at four years' purchase of weighted average profit of last three years (after
partners' salaries); Profits to be weighted as 1:2:3, the greatest weight being given to the last year.
Calculate the value of Goodwill.
[Ans.: Goodwill- 1,28,000.]

Answer 1

Year     profit     weight    Product

2017     50000     1            50000

2018     11000      2             22000

2019     40000    3             120000

                     6                   192000

Weighted average profit = 192000/6 =32000

Goodwill at 4 year’s profit = 32000 *4 = 128000

Working note :-

Calculation of adjusted profit :- 2017 2018 2019

Profit before partner’s salary 140000 101000 130000

Less: salary(40000+50000) (90000) (90000) (90000)

50,000 11,000 40,000

Answer 2

Explanation:

salary 50000+40000=90000

subtract every year