Question

The profits of last five years are Rs. 1,70,000; Rs. 1,00,000; Rs. 1,40,000; Rs. 2,00,000 and Rs. 1,60,000. Find the value of goodwill if it is calculated on average profits of last five year on the basis of three year purchase:
1 point
a. Rs 5,70,000
b. Rs 5,30,000
c. Rs 5,10,000
d. Rs 1,70,000​

Answer 1

Answer: The amount of Goodwill is Rs. 4,62,000.

Step by step Explanation:

Finding the Average Profit first,

$\tt{Average \: \: Profit = \frac{ Total \: \: Profit}{ Number \: \: of \: \: years}}$

$\small\tt= \frac{1,70,000 \: + \: 1,00,000 \: + \: 1,40,000 \: + 2,00,000 \: + \: 1,60,000}{5}$

$\tt = \frac{7,70,000}{5} \: \\ \\ = \: \tt1,54,000$

Thus, Average profit is Rs. 1,54,000

Calculation of Goodwill:

As given, Goodwill is to be calculated as on the basis of 3 year's purchase of Average profit.

Goodwill = 1,54,000 × 3

= Rs. 4,62,000

The given options seem incorrect.

The amount of Goodwill is Rs. 4,62,000.

Answer 2

Question:-

• The profits of last five years are Rs. 1,70,000; Rs. 1,00,000; Rs. 1,40,000; Rs. 2,00,000 and Rs. 1,60,000. Find the value of goodwill if it is calculated on average profits of last five year on the basis of three year purchase:

To Find:-

• Find the value of goodwill if it is calculated on average profits of last five year on the basis of three year purchase.

Solution:-

First ,

We have to find the average profit:-

$\dashrightarrow\sf \: Average \: Profit = \dfrac { Total \: profit } { Number \: of \: years }$

$\dashrightarrow\sf \: Average \: Profit = \dfrac { 170000 + 100000 + 140000 + 200000 + 160000 } { 5 }$

$\dashrightarrow\sf \: Average \: Profit = \dfrac { 770000 } { 5 }$

$\dashrightarrow\sf \: Average \: Profit = 154000$

Now ,

We have to find the value of good will:-

$\dashrightarrow\sf \: Goodwill = 154000 \times 3$

$\dashrightarrow\sf \: Goodwill = 4,62,000$

Hence ,

• The value of Goodwill is 4,62,000