Tvere: B). Find the goodwill of a firm on the basis of two years' purchase of the weighted average profit of the last 4 years. The profits of the last 4 years 2013 – – 20,000, 2014 – * 30,000, 2015 – * 25,000, 2016 – 7 38,000 The weights assigned were 1, 2, 3 and 4 respectively. On scrutiny, it was found that : (a) On 1st January, 2015 heavy repair made on plant amounting to 8,000 was charged to revenue account. The said sum is agreed to be capitalised for goodwill computation. This is subject to 10% depreciation p.a. on straight line method. (6) The closing stock of 2014 and 2016 were over valued by 1,000 and * 2,000 respectively. (c) To cover the management cost, an annual charge of 3,000 should be made for goodwill valuation. [Ans. 57,680]
Answers
Calculate goodwill of a firm on the basis of three Years' purchase of the Weighted Average Profit of the last four years. The porfits of the last four financial years ended 31st March, were: 2016 - Rs. 25,000, 2017 - Rs. 27,000, 2018 - Rs. 46,900 and 2019 - Rs. 53,810. The weights assigned to each year are: 2016 - 1, 2017 - 2, 2018 - 3, 2019 - 4. You are supplied the following information: <br> (i) On 1st April, 2016, a major plant repair was undertaken for Rs. 10,000 which was charged to revenue. The said sum is to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% on Reducing Balance Method. <br> (ii) The Closing Stock for the years ended 31st March, 2017 and 2018 were overvalued by Rs. 1,000 and Rs. 2,000 respectively. <br> (iii) To cover management cost an annual charge of Rs. 5,000 should be made for the purpose of goodwill valuation.