Calculate the value of goodwill as on 1st Jan 2007 on the basis of three years’ purchases of average profits of the last five years profits. The p + L for the years were 2001 – 30000 (profit) 2002 – 40000 (loss) 2003 – 92000 (profit) 2004 – 55000 (profit) 2005 – 70000 (profit) 2006 – 90000(profit) During 2002 profit on sale of fixed assets amounted to Rs 2000, during 2004 amounted to Rs 5000, and in 2006 loss on sale of fixed asset amounted to Rs 5000.
Answers
Explanation:
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:
Explanation:
Concept:
Goodwill arises while a organization acquires some other complete enterprise. The quantity of goodwill is the price to buy the enterprise minus the honest marketplace price of the tangible belongings, the intangible belongings that may be identified, and the liabilities received with inside the buy.
Given:
Average profit of last 5 years
a1= Rs. 30000
a2=Rs. 40000 + 2000 = 42000
a3=Rs. 92000
a4=Rs. 55000 + 5000 = 60000
a5=Rs. 90000 - 5000 = 85000
Find:
To find the value of goodwill as on 1st January 2007
Solution:
Goodwill= Average profit× Number of years
average profit= a1+a2+a3+a4+a5/5
= 30000+42000+92000+60000+85000/5
= 309000/5
Average profit = Rs. 61800
Goodwill = 61800×3
=185400
The value of goodwill as on 1st Jan 2007 on the basis of three years’ purchases is Rs.185400
#SPJ2