Question

calculate the value of firm's goodwill on the basis of two years purchase of the average profit of the last three years. ​

Answer 1

Avg profit = sum of years / no. Of years

= 1,00,000-12,500+1,25,000+1,12,500+12,500 / 3

= 87,500 + 1,25,000 + 1,25,000 / 3

= 3,37,500 / 3

= 1,12,500

GOODWILL....

Firm goodwill = avg profit × no. Of years purchase

= 1,12,500 × 2

= 2,25,000.

So Goodwill of the firm is 2,25,000.

Answer 2

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