Question

calculate goodwill on the basis of 3 and half years purchase of the following

profit & loss
1. 275000
2. 325000
3. 400000
4. 550000
5. 15000 ( loss )
​

Answer 1

Answer:

Calculation of goodwill :

Profit of the first year = Rs. 100000

Profit of the second year = Rs. 20000 (twice of first year's profit)

Profit of the third year = Rs. 300000

(One and half times of profit of second year)

Average profit = Total profit/ no. of years

Average profit = Rs. (100000 + 200000 + 300000) / 3

Average profit = Rs. 600000 / 3

Average profit = Rs. 200000

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

Goodwill = Rs. 200000 * 1.5 years

Goodwill = Rs. 300000

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