Question

You are required to compute the value of goodw
profits of the last three years.
2) Ltd. proposed to purchase the business carried on by N Ltd. Goodwill for this purpose is agreed to be
years.
The appropriate
valued at three years' purchase of the weighted average profits of the past four
weights to be used and profits for the years are as under :
Year
Weight
Profit
MV
1
1,01,000
2015-16
2016-17
2
1,24,000
2017-18
3
1,00,000
2018-19
4
1,50,000
The books of account were closed every year on 31st March. On a scrutiny of the accounts, the following
matters are revealed :
(i) On 1st December, 2017, major repairs were carried out in respect of the plant, spending * 30,000
which was charged to revenue. The said sum is agreed to be capitalised for goodwill calculation
subject to adjustment of depreciation @ 10% p.a. on reducing balance method.
(i) The closing stock on 31st March, 2017 was overvalued by 12,000.
(it) To cover management cost, an annual charge of 24,000 should be made for the purpose of
valuation of goodwill.
Compute the value of goodwill of the business.
[ICSI, Inter]
132​

Answer 1

i) On 1st December, 2017, major repairs were carried out in respect of the plant, spending * 30,000.

statement is true ✔✔