X purchased the business of y from 1sy April 2019 for this purpose Goodwill is to be valued 100 perce
Answers
Explanation:
X purchased the business of Y from 1st Aprit, 2019. For this purpose goodwill 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 201631st March 201731st March 201831st March 2019ProfitLossProfitProfit Rs.1,00,0001,50,0001,50,0002,00,000(after debiting loss of stock by fire Rs. 50,000)(includes voluntary retirment compensation paid Rs. 80,000)Year ended Rs.31st March 2016Profit1,00,000(after debiting loss of stock by fire Rs. 50,000)31st March 2017Loss1,50,000(includes voluntary retirment compensation paid Rs. 80,000)31st March 2018Profit1,50,00031st March 2019Profit2,00,000
Verification of books of accounts revealed the following :
(i) During the year ended 31st March, 2017, a machine got destroyed in accident and Rs. 60,000 was written off as loss in Profit & Loss Account.
(ii) On 1st July 2017, Two Computers costing Rs. 40,000 each were purchased and were debited to Travelling Expenses Account on which depreciation is to be charged @ 10% p.a. on Straight Line Method.
Calculate the value of goodwill.
Explanation:
Please refer to image above
