Question

Abhav. Babu and Charu are partners sharing profits and losses equally. They agree to admit Daman for
equal share of profit. For this purpose, the value of goodwill is to be calculated on the basis of four years
nurchase of average profit of last five years. These profits for the year ended 31st March, were:
Year
2015
2016
2017
2018
2019
Profit/(Loss) ()
1,50,000
3,50,000
5,00,000
7,10,000 (5,90,000)
On 1st April, 2018, a car costing 1,00,000 was purchased and debited to Travelling Expenses Account,
on which depreciation is to be charged @ 25% Interest of 10,000 on Non-trade investments is credit
to Income for the year ended 31st March, 2018 and 2019.
Calculate the value of goodwill after adjusting the above.

Answer 1

Answer:

Explanation:

Year               P/L                                Adjustment          Adjust profit / loss

2015           150000               --                                                150000

2016            350000                         ---                                   350000

2017             500000                          ----                                 500000

2018           710000                         (10000)  Abnormal g      700000

2019           590000     +100000  - 25000- 10000               525000

                                                                                                                           

                                                     Total                                  1175000                

A.P = 1175000/5

= 235000

Goodwill =  235000 * 4 = 940000

Answer 2

Answer:

Goodwill = 940000