Tools Valuation of goodwill Microsoft PowerPoint Y Ltd. proposed to purchase business carried on by Mr. A. Goodwill for this purpos is agreed to be valued at 3 year's purchase of the weighted average profits of the pa four years. The profit for these years and respective weights to be assigned are as follows: Years 2010 2011 2012 2013 Profits() 20,200 1 24,800 2 20,000 30,000 On a scrutiny of the accounts, the following matters are revealed: (a) On 1st September, 2012 a major repair was made in respect of plant incurring Rs. 6,000 which was charged to revenue, the said sum is agreed to be capitalized for goodwill calculation subject to adjustment of depreciation of 10% p.a. on reducing balance method. (b) The closing stock for the year 2011 was over valued by Rs. 2,400; and (e) To cover management cost an annual charge of Rs. 4,000 should be made for the purpose of goodwill valuation Weight
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The closing stock for the year 2011 was over valued by Rs. 2,400 On 1st September, 2012 a major repair was made in respect of plant incurring Rs. 6,000 which was charged to revenue
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The closing stock for the year 2011 was over valued by Rs. 2,400 On 1st September, 2012 a major repair was made in respect of plant incurring Rs. 6,000 which was charged to revenue..
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