Question

Chapter 3 . Goodwill: Nature and Valuation 3.31
Weighted Average Profit Method when Past Adjustments are Made
16. Calculate goodwill of a firm on the basis of three years' purchase of the Weighted Average Profit of the last
four years. The profits of the last four financial years ended 31st March, were: 2016– 25,000; 2017-* 27,000:
2018_46,900 and 2019- 53,810. The weights assigned to each year are: 2016-1; 2017-2; 2018-3;
2019—4. You are supplied the following information:
(1) On 1st April, 2016, a major plant repair was undertaken for 10,000 which was charged to revenue.The
said sum is to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% on
Reducing Balance Method.
(ii) The Closing Stock for the years ended 31st March, 2017 and 2018 were overvalued by * 1,000 and
2,000 respectively.
(iii) To cover management cost an annual charge of 5,000 should be made for the purpose of goodwill
valuation.
[Ans.: Goodwill- 1,20,000.]
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Answer 1

Answer:

Chapter 3 . Goodwill: Nature and Valuation 3.31

Weighted Average Profit Method when Past Adjustments are Made

16. Calculate goodwill of a firm on the basis of three years' purchase of the Weighted Average Profit of the last

four years. The profits of the last four financial years ended 31st March, were: 2016– 25,000; 2017-* 27,000:

2018_46,900 and 2019- 53,810. The weights assigned to each year are: 2016-1; 2017-2; 2018-3;

2019—4. You are supplied the following information:

(1) On 1st April, 2016, a major plant repair was undertaken for 10,000 which was charged to revenue.The

said sum is to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% on

Reducing Balance Method.

(ii) The Closing Stock for the years ended 31st March, 2017 and 2018 were overvalued by * 1,000 and

2,000 respectively.

(iii) To cover management cost an annual charge of 5,000 should be made for the purpose of goodwill

valuation.

Answer 2

Answer:

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