Question

From the following information ofNairutva and Rutvik's firm determine the value of goodwill of partnership firm on the basis of
capitalisation of Weighted Average Profit Method.
Year Profit (₹)
2012-'13 45,000
2013-'14 50,000
2014-'15 65,000
2015-'16 75,000
2016-'17 90,000
Additional information :
(1) Business assets : ₹6,00,000
(2) Business liabilities: ₹1,70,000
(3) Normal expected return of business is 10%.


plz give me the answer as fast as possible
MAY DEAR ❤️​

Answer 1

Answer:

Explanation:

Calculation of weighted profits :

Since the profits are displaying an increasing trend , weighted average method are used to value goodwill

Particulars             2012-13        2013-14     2014-15    2015-16     2016-17

Profits earned       45,000       50,000     65,000     75,000     90,000

Weights                    1                  2                  3               4                   5    

Weighted profit        45,000      1,00,000    1,95,00    3,00,000     4,50,000

Weighted Average profit = sum of weighted profits / Total of weights

= 10,90,000 / 15 = 72667

Capital of firm = Assets - liabilities = 6,00,000 - 1,70,000 = 4,30,000

Value of the firm = 72667 / 10 x 100 = 7,26,670

Value of goodwill = 7,26,670 - 4,30,000 = Rs 2,96,670