Question

calculate the value of goodwill at 3 years purchase of average profit of last three years profit ;
The profit of the first year was Rs.8000, second year twice the profit of the first year and third year one and half of the profit of the second year ( Ans :- therefore value of goodwill RS. 48000 )​

Answer 1

Answer: Value of goodwill is Rs. 48,000

Step by step explanation:

Given:

• Profit of first year = Rs. 8,000
• Second year profit is twice the profit of the first year = 2 × 8,000 = Rs. 16,000
• Third year profit is one and half of the profit of second year = 16,000 × 1.5 = Rs. 24,000

We know that,

Average Profit = Total Profit / Number of years

= (8,000 + 16,000 + 24,000)/3

= 48,000 / 3

= 16,000

Average Profit = Rs. 16,000

Calculation of Goodwill:

Goodwill is valued at 3 years' purchase of average profit.

Thus, calculating it by using the following formula :

Goodwill = Average profit × Number of years' purchase

= 16,000 × 3

= Rs. 48,000

Value of Goodwill is Rs. 48,000.

Answer 2

Given :-

The profit of the first year was Rs.8000, second year twice the profit of the first year and third year one and half of the profit of the second year

To Find :-

Goodwill

Solution :-

Since, The profit of first year is 8000

In Second year it become twice

Twice of second year = 2 × 8000

Second year = 16000

Third year = 16000 × 3/2 = 48000/2 = 24000

Now

Total profit made = 8000 + 16000 + 24000

Total profit made = 48000

Avg. Profit = 48000/3

Avg. Profit = 16000

Goodwill = 16000 × 3

Goodwill = 48000