Question

Calculate value of goodwill on the basis of three years purchase of average profit of the preceding five years which were as follows:

Answer 1

Answer:

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Answer 2

Explanation:

Working Notes:

Goodwill = $Average profit \times Number of years purchase$

Average profit = $\frac{8,00,000+15,00,000+18,00,000-4,00,000+13,00,000}{5}$

$=\frac{50,00,000}{5}=210,00,000$

$Number of years purchase - 3 \therefore Goodwill =10,00,000 \times 3=\mathbf{} 30,00,000$