Question

Profits of last three years were Rs 7500, Rs 8000 and Rs 8500. The value of goodwill at 2 years' purchase of average profit will be.​

Answer 1

Given :

• Profits of last three years were Rs. 7500, Rs. 8000 and Rs. 8500.

To Find :

• The value of goodwill at 2 years purchase of average profit.

Solution :

Firstly let's calculate the average profit,

• $\boxed{ \bf{average \: profit = \frac{total \: profit}{no. \: of \: years} }} \: \: \star$

Substituting values in the equation,

$\dashrightarrow \: \: \: \: \: \tt \: Average \: profit = \frac{Rs. \:7500 + Rs. \: 8000 + Rs. \: 8500}{3}$

$\dashrightarrow \: \: \: \: \: \tt \: Average \: profit = \frac{Rs. \: 24000}{3}$

$\dashrightarrow \: \: \: \: \: \bf \: Average \: profit = Rs. \: 8000$

Now, finding the value of goodwill at 2 years purchase of average profit. Here, we need to multiply the value of average profit with the number of years.

$\longrightarrow \: \: \: \: \: \tt \: Goodwill = Rs. \: 8000 \times 2$

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$\longrightarrow \: \: \: \: \: \underline{ \boxed{\bf{ \purple{Goodwill = Rs. \: 16000 }}}} \ \pink{ \bigstar}$

⛬ The value of goodwill at 2 years purchase of average profit is Rs. 16000.