Question

a) The goodwill of the firm is valued at three years purchase of average profit of last 3 years. The profits are as follows:

Year Profit

2017-18 4,00,000 (including an abnormal gain of Rs.50,000.

2018-19 5,00,000 (after charging an abnormal loss of Rs.1,00,000.

2019-20 2,50,000

Calculate the amount of goodwill.

b) Give the journal entry when new partner brings his share of goodwill in cash Rs. 25,000​

Answer 1

Answer:

2017-18 4,00,000 (including an abnormal gain of Rs.50,000.