Question

X purchased the business of Y from 1st April, 2019. For this purposegoodwill is to be valued at 100% of the average annual profits of the last four years.The profits shown by Y's business for the last four years were :Year ended31st March, 2016 Profit 1,00,000 (after debiting loss of stock by fire350,000)2017 Loss 1.50,000 (includes voluntary retirementcompensation paid 80,000)2018 Profit 1,50,0002019 Profit 2,00,000Verification of books of accounts revealed the following:(1) During the year ended 31st March, 2017, a machine got destroyed in accidentand 60,000 was written off as loss in Profit & Loss Account(ii) On 1st July 2017. Two Computers costing 340,000 each were purchased andwere debited to Travelling Expenses Account on which depreciation is to becharged @ 10% p.a. on Straight Line Method.Calculate the value of goodwill.​

Answer 1

Answer:

goodwill = 100% of avg. profit

= 138500

Explanation:

there is some error in book answer.

It is the correct ans of this question.