Question

4. Total weighted profit of last five year of a firm is Rs.2,70,000, what is the value of goodwill on
the basis of weighted average profit of last 3 years ?
[a] 1,62,000
[b] 54,000
[c] 22,500
[d] None of the given​

Answer 1

Question :-

To find value of goodwill.

Answer :-

Weighted Average profit method -

• ) Product - profit× weight

• ) weighted average profit - $\sf\frac{total \: product}{total \: weight}$

• ) valuation of goodwill- weighred average profit × agreed no. of years

$\sf : \implies \: total \: weighted \: profit \: of \: last \: 5 \: years = 270000$

$\sf : \implies \: no. \: of \: years \: purchased \: = 3$

$\sf : \implies \:total \: weight = 1 + 2 + 3 + 4 + 5 = 15$

$\sf : \implies \: weighted \: avg. \: profit = \frac{270000}{15} = 18000$

$\sf : \implies \: valuation \: of \: goodwill = 18000 \times 3 = 54000$

$\bold\blue{valuation \: of \: goodwill = 54000}$

• option b) is the answer.