Question

The profit of last three years are 84,000, 3 78,000 and 3 90,000. Find out the goodwill of two years purchase.​

Answer 1

Goodwill = Average profit × Number of years of purchase

Average profit = Total profit / Numbers of years

= 84,000 + 3,78,000 + 3,90,000 / 3

= 8,52,000 / 3

= Rs. 2,84,000

Goodwill = Average profit × Number of years of purchase

= 2,84,000 × 2

= Rs. 5,68,000

Goodwill = Rs. 5,68,000

Average profit = Rs. 2,84,000