Question

The profits of a firm for the year ended 31st March for the last five years were as follows: 2010-20,000 , 2011-24,000, 2012-30,000, 2013-25,000, 2014-18,000.Calculate the value of goodwill on the basis of three years purchase of weighted average profits after assigning weights 1,2,3,4 and 5 respectively to the profits for 2010, 2011, 2012, 2013 and 2014. ​

Answer 1

Given :

Profits of firm for 5 Years.

No of Year's Of Purchase = 3

To Find :

Goodwill

Solution :

Products :

= 20,000 × 1 = 20,000

= 24,000 × 2 = 48,000

= 30,000 × 3 = 90,000

= 25,000 × 4 = 1,00,000

= 18,000 × 5 = 90,000

Total Of Products = 3,48,000

Total Of Weightage = 15

[ Weighted Average Profit = Total Products / Total Weight ]

= Weighted Average Profit = 3,48,000 / 15

= 23,200

[ Goodwill = Weighted Average Profit × No.of Year's Of Purchase ]

Goodwill = 23,200 × 3

= 69,600

ie, Goodwill Of Firm = 69,600

Refer The Attachment ;