Question

calculate the amount of goodwill in the following case at three years purchase of the last five years average profit the profit and losses of the last fiver years were 1st. years profit 2000 2nd. years profit 1500 3rd .years 300 losses 4th.years 3000 profits​

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