Question

The following particulars are available in respect of the business carried on by a partnership firm: Trading Results: 2001 Loss Rs. 5,000 2002 Loss Rs. 10,000 2003 Profit Rs. 75,000 2004 Profit Rs. 60,000 You are required to compute the value of goodwill on the basis of 3 years purchase of average profit of the business. (a) Rs. 1,25,000 (b) Rs. 90,000 (c) Rs. 10,000 (d) Rs. 1,20,000

Answer 1

average profits = (5000)+(10,000)+75,000+60000/4

= 30,000

Goodwill = average profits*no of years purchase

30,000*3

90,000

ans (b)