Question

X and Y are partners sharing profits and losses in the ratio of 4:3. They agree to admit Z as a partner for 1/5th share . For this purpose, the goodwill of the firm is to be calculated on the basis of 3 yrs purchase of last 4 years average profits which were 2015 ₹ 70,000(after allowing interest on investment of ₹ 5,000) 2016 ₹25,000 ( after charging loss of ₹ 6,995 on sale of plant). 2017 ₹ 61,000 2018 ₹45,000. Other information given was on 1st July 2016, the firm had purchased a computer for ₹ 30,000 and it was debited to stationary expenses. Depreciation is to be charged on computer @ 10% p.a on WDV method.The Closing Stock of 2016 and 2017 wee overvalued by ₹ 3,000 and ₹ 2,000 respectively.To cover the operating cost an annual charge of ₹ 4,500 should be made for the purpose of Goodwill. Calculate the Goodwill?

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Answer 1

Answer:

16500

Explanation:

Step 1:

Calculation of Average Profit:

2016-- 50000-5000= 45000

2017-- (20000)+30000= 10000

2018-- 70000-(18000+8000)= 44000

Average Profit= [45000+10000+44000]/ 3

= 33000

Step 2:

Calculation of Goodwill:

Goodwill= 33000* 2

= 66000

Step 3:

Goodwill brought in Z= 66000/ 4

= 16500