Following details are available about the business of sagar Ltd., (a) Profits: 1994 – Rs. 80,000; In 1995 – 1,00,000, In 1996 – Rs. 1,20,000. (b) Non-recurring income of Rs. 8,000 is included in the profit of 1995. (c) Profit of 1994 have been reduced by Rs. 12,000 because goods were destroyed by fire. (d) Goods have not been insured but it is thought prudent to insure them in future. The insurance premium is estimated at Rs. 800 per year. (e) Reasonable remuneration of the proprietor of the business is 12,000 per year but it has not been taken into account for calculation of above mentioned profits. (f) Profit of 1996 include Rs. 10,000 income on investment. Calculate Goodwill on the basis of three years purchase of the average profit of last three years.
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