Question

Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill
three years' purchase on Weighted Average Profit Method taking profits of last five years. Weights
assigned to each year as 1,2,3,4 and 5 respectively to profits for the year ended 31st March, 2015 to 2019.
The profits for these years were: 70,000, 1,40,000,1,00,000, * 1,60,000 and 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(0) There was an abnormal loss of 20,000 in the year ended 31st March, 2015.
(ii) There was an abnormal gain (profit) of 30,000 in the year ended 31st March, 2016.
(ii) Closing Stock as on 31st March, 2018 was overvalued by 10,000.
Calculate the value of goodwill.
[Ans.: Value of Goodwill— 4,17,000.)
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Answer 1

Answer:

Goodwill = weighted Average profit x Number of years's purchase  Goodwill = Rs. 1,39,000 x 3 = Rs. 4,17,000