Question

Calculate Goodwill from the following information by using Average Profit Method. (5 marks) Profits for 4 years are given and they are, 2014 - ₹ 25,000, 2015-₹ 20,000, 2016-₹ 18,000, 2017- ₹ 27,000. Goodwill is to be valued at two years purchase of Average profit.​

Answer 1

Answer:

Calculation of goodwill :

(1) Average profit = Total profit/ No. of years

Average profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5

Average profit = Rs. 5000000/5

Average profit = Rs. 1000000

Goodwill = Average profit * No. of year's purchase

Goodwill = Rs. 1000000 * 3

Goodwill = Rs.3000000

Answer 2

Answer:

Calculation of goodwill :

Calculation of goodwill : (1) Average profit = Total profit/ No. of years

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5Average profit = Rs. 5000000/5

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5Average profit = Rs. 5000000/5Average profit = Rs. 1000000

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5Average profit = Rs. 5000000/5Average profit = Rs. 1000000Goodwill = Average profit * No. of year's purchase

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5Average profit = Rs. 5000000/5Average profit = Rs. 1000000Goodwill = Average profit * No. of year's purchaseGoodwill = Rs. 1000000 * 3

Calculation of goodwill : (1) Average profit = Total profit/ No. of yearsAverage profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5Average profit = Rs. 5000000/5Average profit = Rs. 1000000Goodwill = Average profit * No. of year's purchaseGoodwill = Rs. 1000000 * 3Goodwill = Rs.3000000

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