Question

The good will of a business is to be valued at
3 years purchase of the average profits of the
last three years. The profits of the last
years are Rs:5000 R6:6000 and Rs: 7,000
respectively. Hence the good will be valued At

Answer 1

Step 1: 

Calculation of Average Profit:

Average Profit= [12000+18000+16000+14000]/ 4

                        = 15000

Step 2:

Calculation of Goodwill:

               = Average profit * No. of purchase year's

               = 15000* 3

               = 45000

hope this helps you