Question

Profits of a firm for the year ended 31st March for the last five years were:
Calculate value of goodwill on the basis of three years purchase of Weighted Average Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for years ended 31st March, 2014, 2015, 2016, 2017 and 2018.

Answer 1

HEYA MATE GOOD QUESTION

times the average annual profit of the previous four or five years whichever is higher. The agreed profits for goodwill

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Answer 2

Explanation:

Working Notes:

$Goodwill = Weighte Average Profit \times Number of years' purchase =23,200 \times 3=\mathbf{} 69,600$

Weighted Average Profit = $\frac{Total Product of Profits}{Total of Weights}$

$=\frac{3,48,000}{15}=23,200$