Question

Good will of the firm is valued at ₹5,00,000 at 2 years of purchase of average profit . Determining the missing values:

Total Normal profit=₹2,50,000+?+₹3,00,000-₹1,00,000+₹3,50,000=₹?​

Answer 1

Answer:

Step 1: Calculation of Average Profit from goodwill:

Average Profit= Goodwill/ number of years' of purchase

= 500000/2

= 250000

Step 2: Calculation of Total profit from Average Profit:

Total Profit= Average Profit * Number of years

= 250000 * 5

= 1250000

Step 3: Calculation of missing profit from total profit:

Missing profit= 1250000- 250000- 300000+ 100000- 350000

= 450000