Question

Q4. P, R and I are partners in a firm sharing profit and losses in the ratio of 3:2-5. It was decided to
value goodwill on the basis of two year's purchase of weighted average profits of the firm for the
last three years. The profits of the firm were
YEARS
PROFITS
WEIGHT ASSIGNED
2017
* 60000
(including abnormal gain of 20000) 1
2018
*160000
2.
2019
* 200000
3
You are required to calculate the firm's goodwill on that date.​

Answer 1

Answer:

840000

Explanation:

yr           profit   weights    w x p

2017   40000        1          40000

2018  160000      2        320000

2019  300000      3      900000

                                   ---------------------

                                       1260000

weighted av profit = 1260000/3=420000

g/w = 2 x 420000 = 840000