Question

A firm earned net profits during the last four years as : First year * 18,000 ; Second year 20,500 ; Third
year * 25,500; Fourth year 28,000; Fifth year 23,000.
Goodwill of the firm is valued at 10% less than thrice the average profit of the preceding five years.​

Answer 1

Answer:

average profit=18000+20500+25500+28000+23000/5=115000/5=23000

Goodwill=23000-10%=20700

goodwill=20700Rs

Answer 2

Answer:

Average profit of last 5 years

= (18000 + 20500 + 25500 + 28000 + 23000)/5

= 115000/5

= 23000

Therefore,

Goodwill of firm

= 3*23000(1 - 10/100)

= 69000(9/10)

= 6900*9

= Rs 62100