Question

Find out the Value of Goodwill at two years Purchase of the Average Net Profits of
the last three year Profits stood at Rs 15,000 in 1997, Rs 20,000 in 1998 & Rs.
28,000 in 1999 ?​

Answer 1

Answer:

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Answer 2

Answer:

The total Value of Goodwill = Rs  42,000

Explanation:

Given :

• The Goodwill of forms should be valued on the basis of 2 year purchase

• 3 years average profit

Year ---- Profit

1997 ---- Rs 15,000

1998 ---- Rs 20,000

1999 ---- Rs 28,000

To find :

• Calculate the total Value of Goodwill

Solution :

Goodwill = Average Profit × Number of year's Purchases

Average profit =

$\sf{\longrightarrow{\dfrac{Total \: Profit \: for \: past \: given \: years}{Number \: of \: years}}}$

$\sf{\longrightarrow{\dfrac{15,000 \: + \: 20,000\: + \: 28,000}{3}}}$

$\sf{\longrightarrow{\dfrac{63,000}{3} = 21,000}}$

Goodwill = Average Profit × Number of year's Purchases

Number of years Purchases = 2 years

Goodwill = 21,000 × 2

$\longrightarrow \: 42,000$

Therefore,

The total Value of Goodwill = Rs  42,000