Question

Q. 4. X purchased the business of Y from 1st April, 2019. For this purpose
goodwill is to be valued at 100% of the average annual profits of the last four years.
The profits shown by Y's business for the last four years were :
Year ended
31st March, 2016 Profit 1,00,000
(after debiting loss of stock by fire
*50,000)
2017 Loss 1,50,000
(includes voluntary retirement
compensation paid 80,000)
2018 Profit 1,50,000
2019 Profit 2,00,000
Verification of books of accounts revealed the following:
(1) During the year ended 31st March, 2017, a machine got destroyed in accident
and 60,000 was written off as loss in Profit & Loss Account.
(ii) On 1st July 2017, Two Computers costing 40,000 each were purchased and
were debited to Travelling Expenses Account on which depreciation is to be
charged @ 10% p.a. on Straight Line Method.
Calculate the value of goodwill.
Ans. Goodwill *1,39,000.]
Hint. Profit for the year ended 31st March 2018 2,24,000 and for 2019 1,92,000.​

Answer 1

Answer:

On 1st July 2017, Two Computers costing 40,000 each were purchased and

were debited to Travelling Expenses Account on which depreciation is to be

charged @ 10% p.a.