Question

Calculate tre vune
5. Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average pro
the last three years. The profit for first year was 1,00,000, profit for the second year was twice the us
of the first year and for the third year profit was one and half times of the profit of the second year
[Ans.: Goodwill 3,000​

Answer 1

Proper question: Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average profit of the last three years. The profit for first year was Rs. 1,00,000, profit for the second year was twice the profit of the first year and for the third year profit was one and half times of the profit of the second year.

Answer: Value of goodwill is Rs. 3,00,000.

Step by step explanation:

Given that,

Profit of first year is Rs. 1,00,000.

Second year profit is twice the profit of the first year = 2 × 1,00,000 = Rs. 2,00,000

Third year profit is one and half times the profit of second year = 2,00,000 × 1.5 = Rs. 3,00,000

We know that,

$\tt{Average \: \: Profit = \frac{Total \: \: Profit }{Number \: \: of \: \: years}}$

$\tt= \frac{(1,00,000 + 2,00,000 + 3,00,000)}{3}$

$\tt= \frac{ 6,00,000 }{ 3}$

$\tt= 2,00,000$

Average Profit = Rs. 2,00,000

• Calculation of Goodwill:

Goodwill is valued at 1.5 years' purchase of the average profit.

Thus, calculating it by using the formula :

$\small \tt{Goodwill = Average \: profit \times Number \: of \: years' \: purchase}$

= 2,00,000 × 1.5

= Rs. 3,00,000

Value of Goodwill is Rs. 3,00,000.

Answer 2

Correct Question :

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• Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average profit of last three years. Profit for first year was Rs. 1,00,000. Profit for the second year was twice the of the profit of first year and profit for the third year was one and half times of the profit of the second year.

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Required Answer :

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• Value of firm's goodwill is Rs. 3,00,000.

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Step – By – Step Explanation :

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• We know that, profit for first year was Rs. 1,00,000, profit for second year was twice the profit of first year and profit for third year was one and half times of the profit of second year.

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⚝ Finding profit for 2nd and 3rd years :

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$\clubsuit$ According to the Question :

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➦ Profit (2nd year) = 2[Profit(1st year)]

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➦ Profit (2nd year) = 2(100000)

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➦ Profit (2nd year) = 2 × 100000

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➦ $\underline{\boxed{\bf{\purple{Profit\: (2nd\: year) = 200000}}}}\:\bigstar$

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• Therefore, profit for second year was Rs. 2,00,000.

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Also,

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➦ Profit (3rd year) = $\sf 1\dfrac{1}{2}$[Profit(2nd year)]

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➦ Profit (3rd year) = $\sf 1\dfrac{1}{2}(200000)$

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➦ Profit (3rd year) = $\sf 1\dfrac{1}{2}\:\times\:200000$

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➦ Profit (3rd year) = $\sf \dfrac{3}{\cancel{2}}\:\times\:\cancel{200000}$

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After cancelling 200000 with 2, we get :

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➦ Profit (3rd year) = 3 × 100000

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➦ $\underline{\boxed{\bf{\pink{Profit\: (3rd\: year) = 300000}}}}\:\bigstar$

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• Therefore, profit for third year was Rs. 3,00,000.

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$\rightarrow\:\sf Total\: Profit = 100000 + 200000 + 300000$

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$\rightarrow\:\underline{\boxed{\bf{\orange{Total\:Profit = 600000}}}}\:\bigstar$

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• Therefore, total profit is Rs. 6,00,000.

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Now,

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⚝ Finding average profit :

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❏ Using formula :

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$\quad\tiny\clubsuit\:{\underline{\boxed{\bf{\blue{Average\:Profit = \dfrac{Total\:Profit}{Number\:of\:years}}}}}}$

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Putting all known values :

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➥ Average Profit = $\sf \dfrac{600000}{3}$

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➥ Average Profit = $\sf{\cancel{\dfrac{600000}{3}}}$

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After cancelling 6,00,000 with 3, we get :

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➥ $\underline{\boxed{\bf{\gray{Average\:Profit = 200000}}}}\:\bigstar$

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• Therefore, average profit is Rs. 2,00,000.

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⚝ Finding value of firm's goodwill :

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❏ Using formula :

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$\quad\tiny\clubsuit\:{\underline{\boxed{\bf{\green{Goodwill = Average\:Profit\:\times\:No.\:of\:years'\:purchase}}}}}$

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Putting all known values :

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➦ Goodwill = $\sf 200000\:\times\:1\dfrac{1}{2}$

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➦ Goodwill = $\sf \cancel{200000}\:\times\:\dfrac{3}{\cancel{2}}$

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After cancelling 200000 with 2, we get :

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➦ Goodwill = 100000 × 3

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➦ $\underline{\boxed{\bf{\red{Goodwill = 300000}}}}\:\bigstar$

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• Therefore, value of firm's goodwill on the basis of one and half years' purchase of the average profit of last three years is Rs. 3,00,000.

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