Question

From the following data relating to Padma &co calculate the goodwill on the basis of three years purchase of the average profits
(1)profit for the years ending 2000,2001,2002 were Rs 80000, Rs90000,Rs 100000
(2)A non -recurring income of Rs.15000 is included in the profits of 2000
(3)The closing stock for the year 2001 was over valued by Rs.30000​

Answer 1

Answer:

(1)270000

(2)255000

(3)240000

Explanation:

(1) First we have to calculate Average Profit

Average profit=sum of all profit/number of year

=80000+90000+100000/3

=270000/3

=90000

value of goodwill=average profit×number of purchase year

value of goodwill=90000×3

=270000

(2)First we have to solve the adjustment

non reoccurring income is included on the profit so,

profit of year2002=80000-15000

=65000

Average profit =65000+90000+100000/3

=255000/3

=85000

value of goodwill=85000×3

=255000

(3)adjustment of over value of closing stock

profit of year 2001=90000-30000

=60000

average profit=80000+60000+100000/3

=240000/3

=80000

value of goodwill=80000×3

=240000

Hope this will help you..