Question

Goodwill of a firm is valued at the year purchases less 10% of the average profit of
last five years. The results of last five years are as under-
3,000 Profit
3,300 Profit
3,700 Profit
3,400 Loss
5,400 Profit
Calculate the value of goodwill​

Answer 1

Answer:

Your answer is 2160

Explanation:

Average profit=3000+3300+3700-3400+5400/5

=12000/5

=2400

Average profit=2400

Now,

We valued Goodwill at less 10% of average profit

so

2400×10%

240

2400-240

=2160

So the Goodwill of the firm is 2160

Hope it helps you

Answer 2

Question:-

Goodwill of a firm is valued at the year purchases less 10% of the average profit of last five years. The results of last five years are as under-

• 3,000 Profit

• 3,300 Profit

• 3,700 Profit

• 3,400 Loss

• 5,400 Profit

Calculate the value of goodwill​

Profit for the last 5 years is:-

• 2017 – Rs. 3,000

• 2018 – Rs. 3,300

• 2019 – Rs. 3,700

• 2020 – Rs. 3,400 (LOSS)

• 2021 – Rs. 5,400

To find:-

Goodwill

Calculations:-

Goodwill = Average profit - 10% of Average profit

Average profit = Sum of profits ÷ no: of years

Sum of profits = 12,000

No: of years = 5

Average profit = 12,000 ÷ 5 = 2,400

Goodwill = Average profit - 10% of Average profit

Goodwill = 2,400 - 240 = 2,160