Question

kernail purchased jarnail's business on 1st jan.2015 the profits for the last 3 year are: 2012-40000 rupee
2013-50000rupee
2014- 45000 rupee
calculate the value of goodwill on the basis of 2 years purchase of the average profit of the last three years
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Answer 1

Answer:

Normal Profit for the year 2016-17= (Total Profit - Abnormal Gain)= ₹ ( 1,00,000 - 12,500 ) = ₹ 87,500.

Normal Profit for the year 2017-18= (Total Profit + Abnormal Loss)= ₹ ( 1,25,000 + 25,000 ) = ₹ 1,50,000

Normal Profit for the year 2018-19= (Total Profit - Indirect Expenses)= ₹ ( 1,12,500 - 12,500) = ₹ 1,00,000

Average Profits = `[( "Normal Profits for 2016 -17") + ("Normal Profits for 2017 -18") + ("Normal Profits for 2018 -19")]/3`

Average Profits = `[87,500 +1,50,000 + 1,00,000]/3` = Rs. 1,12,500

Goodwill = Average Profits of last three years x No. of Years of Purchase

Goodwill = Rs.( 1,12,500 x 2 ) = Rs. 2,25,000.

hope it's help you...