Question

(3). (Average Profit Method): Akansha, Chetna and Dipanshu are partners in a
fimm shring profits and losses in the ratio of 3:2:1. They decide to lake Jatin
into partnership form January 1, 2015 for1/5 share in the future profits. For
this purpose goodwill is to be valued at 2 times the average annual profits
of the previous four years. The average profits for the past four years were.
2012
2013
50 600
2014
62400​

Answer 1

The question is incomplete, The given values are -

Given:

Number of partners = 4

Profit sharing ratio = 3 : 2 : 1

Valuation of goodwill = 2x

Profits - 2012  - 96,000

2013  - 60,600

2014  - 62,400

2015 - 84,400

To Find:

Average profits of past four years

Solution:

Total profit = 96,000 + 60,600 + 62,400 + 84,400

= 3,03,400

Average Profit = Total Profits / Number of Years.

AP = 3,03,400/4

= 75,850

Goodwill = Average Profit  × Number of years of purchase

= 75,850 × 2

= 151,700

Answer: The average profits were of 75,850 and goodwill was 151,700.