Question

8. Calculate goodwill of a firm on the basis of three years purchase of the weighted averige
profits of the last four years. The profit of the last four years were : 2012- 20,200, 2013
*24,800; 2014-720,000 and 2015-730,000. The weights assigned to each year are : 2012-
2013-2; 2014-3, and 2015-4. You are supplied the following information:
1. On September 1, 2014 a major plant repair was undertaken for 6,000 which was charged
to revenue. The said sum is to be capitalized for goodwill calculation subject to adjust
ment of depreciation of 10% p.a. on reducing balance method.
2. The closing stock for the year 2013 was overvalued by 2,400.
3. To cover management cost an annual charge of 4,800 should be made for purpose of
goodwill valuation.
[Ans. Goodwill is 87,712.)​

Answer 1

Answer:

Calculate goodwill of a firm on the basis of three years purchase of the weighted averige

profits of the last four years. The profit of the last four years were : 2012- 20,200, 2013

*24,800; 2014-720,000 and 2015-730,000. The weights assigned to each year are : 2012-

2013-2; 2014-3, and 2015-4. You are supplied the following information:

1. On September 1, 2014 a major plant repair was undertaken for 6,000 which was charged

to revenue. The said sum is to be capitalized for goodwill calculation subject to adjust

ment of depreciation of 10% p.a. on reducing balance method.

2. The closing stock for the year 2013 was overvalued by 2,400.

3. To cover management cost an annual charge of 4,800 should be made for purpose of

goodwill valuation.

[Ans. Goodwill is 87,712.)