Question

Goodwill of the firm on the basis of 2 years' purchase of average profit of the last 3 years is Rs. 25,000. Find average profit.

Answer 1

Answer:

12500

Explanation:

Goodwill= 2 x average profit

25000=2xaverage profit

12500 = average profit

Answer 2

Given:

Number of years' purchase=2

Goodwill=Rs. 25,000

To find:

Average profit

Solution:

We can find the solution by following the given steps-

We know that the amount of goodwill is the product of average profit and the number of years' purchases.

Goodwill= Number of years' purchase × average profit

On putting the values, we get

25,000= 2× average profit

Average profit= 25000/2

= Rs. 12,500

Therefore, the amount of average profit is Rs. 12,500.