Question

A, B, and C are partners sharing profit and ratio in the ratio of 5:3:2. they admit X for 1/5th share. for the purpose of admission of admissions of X, the goodwill of forms should be valued on the basis of 3 year purchase of last 4 years average profit.
The profits were:
2014-2,00,000
2015-2,40,000
2016-2,60,000
2017-2,10,000
calculate the total value of goodwill of the firm​

Answer 1

Answer:

The total Value of Goodwill of the firm = 6,82,500

Explanation:

Given :

• The Goodwill of forms should be valued on the basis of 3 year purchase

• 4 years average profit

$\begin{tabular}{|c|c|}\cline{1-2} Year & Profit \\\cline{1-2}\ 2014 & 2,00,000 \\\cline{1-2}\ 2015 & 2,40,000 \\\cline{1-2}\ 2016 & 2,60,000 \\\cline{1-2}\ 2017 & 2,10,000 \\\cline{1-2}\end{tabular}$

To find :

• Calculate the total Value of Goodwill

Solution :

Goodwill = Average Profit × Number of year's Purchases

Average profit =

$\sf{\longrightarrow{\dfrac{Total \: Profit \: for \: past \: given \: years}{Number \: of \: years}}}$

$\sf{\longrightarrow{\dfrac{2,00,000 \: + \: 2,40,000\: + \: 2,60,000 \: + 2,10,000}{4}}}$

$\sf{\longrightarrow{\dfrac{910000}{4} = 227500}}$

Goodwill = Average Profit × Number of year's Purchases

Number of years Purchases = 3 years

Goodwill = 2,27,500 × 3

$\longrightarrow$ 6,82,500

Therefore,

The total Value of Goodwill of the firm = 6,82,500

Answer 2

Given :

Last 4 Years Profits Are :

• 2014- 2,00,000
• 2015- 2,40,000
• 2016- 2,60,000
• 2017- 2,10,000

No. of Years of Purchase - 3

To Find :

Total Value Of Goodwill Of The Firm

Formula To Find :

${\underline{Goodwill \: = Average \:Profit \: \times No.of \: Year's \: of \: Purchase}}$

${\underline{\: Average \: Profit \: = \frac{Sum \: Total \: of \: Profits}{No.of \: Years}}}$

Solution :

$\sf \to \: Avg. \: Profit \: = \frac{200000 + 240000 + 260000 + 210000}{4}$

$\sf\to \: Avg. \: Profit \: = \frac{910000}{4}$

$\sf\to Avg. \: Profit = \: 227500$

Average Profit = 2,27,500

$\sf\to \: Goodwill = 227500 \times 3$

$\sf\to \: Goodwill = 682500$

$\therefore \sf \: Total \: Value \: of \: Goodwill \: = 6,82,500$