Question

X purchased the business of Y from 1st April 2019 for this purpose Goodwill is to be valued at 10% of the average annual profits of the last 4 years the prophet shown by Y's business for the last four years were :
31st March 2016 100000 profit (after debiting loss of stock by fire rupees 50000)
31st March 2017 loss 150000 (includes voluntary retirement compensation paid rupees 80000)
31st March 2018 profit 150000
31st 1st March 2019 profit 2 lakh
Verification of books of accounts revealed the following:
during the year ended 31st March 2017 machine got destroyed in accident and rupees 60000 was written off as loss in profit and loss account
on 1st July 2017 two computers costing rupees 40000 each were purchased and what debited to travelling expenses account on which depreciation is to be charged at the rate 10% per annum on straight line method
Calculate the value of goodwill.​

Answer 1

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