Question

calculate goodwill at 4 years purchased of the last five years. The profit for the first two years are ₹30000, ₹35000, and the business suffer loss for ₹5000, ₹6500, ₹8200.Find the goodwill.​

Answer 1

CORRECT QUESTION :

• ✎ Calculate the value of goodwill at 4 years' purchased of the average profit of last five years. The profit for the first two years are Rs. 30000 and Rs. 35000 repectively, while the business suffer loss for Rs. 5000, Rs. 6500 and Rs. 8200 repectively in the last three years.

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ANSWER :

• ❖ If the profit for the first two years are Rs. 30000 and Rs. 35000 repectively, while the business suffer loss for Rs. 5000, Rs. 6500 and Rs. 8200 repectively in the last three years; then the value of Goodwill at 4 years' purchased of the average profit of last five years will be Rs. 36,240.

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SOLUTION :

❒ Given :-

• Profit for 1st year – Rs. 30,000

• Profit for 2nd year – Rs. 35,000

• Loss for 3rd year – Rs. 5,000

• Loss for 4th year – Rs. 6,500

• Loss for 5th year – Rs. 8,200

❒ To Calculate :-

• Amount of Goodwill on the basis of 4 years' purchase of Average Profit last 5 years = ?

❒ Calculation :-

Here,

• Profit for 1st year – Rs. 30,000

• Profit for 2nd year – Rs. 35,000

∴ Total Profit = Rs. 30,000 + Rs. 35,000

➨ Total Profit = Rs. 65,000

And,

• Loss for 3rd year – Rs. 5,000

• Loss for 4th year – Rs. 6,500

• Loss for 5th year – Rs. 8,200

∴ Total Loss = Rs. 5,000 + Rs. 6,500 + 8,200

➨ Total Loss = Rs. 19,700

So,

• ✠ Actual Total Profit of last 5 years = Total Profit - Total Loss

➜ Actual Total Profit of last 5 years = Rs. 65,000 - Rs. 19,700

➜ Actual Total Profit of last 5 years = Rs. 45,300

Again,

• Actual Total Profit = Rs. 45,300

• No. of Years = 5 years

So,

• ★ Average Profit = $\rm{ \dfrac{ \: Actual \: \: Total \: \: Profit \: }{ \: No. \: \: of \: \: years \: }}$

➜ Average Profit = $\rm{ \dfrac{ \: Rs. 45,300 \: }{ \: 5\: }}$

➜ Average Profit = Rs. 9,060

Now,

• Average Profit = Rs. 3,333.33

• No. of Years' Purchase = 4 years

Hence,

• ✪ Value of Goodwill = Average Profit × No. of Years' Purchase

⇒ Value of Goodwill = Rs. 9,060 × 4

∴ Value of Goodwill = Rs. 36,240