Question

Average Profit Method
1. Goodwill is to be valued at three years' purchase of four years' average profit. Profits of the form
four years ending on 31st March, were:
2018—12,000; 2019-18,000; 2020— 16,000; 2021-14,000.
Calculate the value of Goodwill.​

Answer 1

Answer:

Good will = Average profit × Number of year's purchase

Average profit = Total profit for past given year's/ year

12000+18000 16000+14000 / 4

= 60000 / 4 = 15000

Number of years purchase = 3

Goodwill = 15000 × 3 = 45000

Good Night Shivangi

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