Question

B).Goodwill of a firm is valued at 21/2 years' purchase of the average profits of the last 5 years.The profits of the last 5 years were: ₹18 000 ₹24 000 ₹9 000 (loss) ₹27 000 and ₹40 000 .Compute value of goodwill of the firm. plAns.₹ 500001​

Answer 1

Answer:

Answer is Rs. 50000

Explanation:

This question is to be done by the Average Profit Method....

According to the question, there are 5 years in total with 1 yr loss....We will account the loss but we subtract it....

Average Profits method = Total Profits

No of Years

Therefore, the question

APM= 18000+24000-9000+27000+40000

5

= 1,00,000 = 20000

5

Goodwill = Average Profits × no of years

= 20000× 2.5

= 50000

Hope You understood

Thank You and Happy Learning!