Question : Goodwill is to be calculated at one year's purchase of the average of last three years profit. The profit of the first year was Rs.60,000, second year twice the profit of the first year and the third year one and half times of the profit of second year, goodwill amount will be:
Option 1: Rs.1,50,000
Option 2: Rs.1,20,000
Option 3: Rs.1,20,000
Option 4: Rs.1,30,000
Correct Answer: Rs.1,20,000
Solution : Profit: 1st Year = Rs.60,000 2nd Year = 2 X Rs.60,000 = Rs.1,20,000 3rd Year = 1.5 X 1,20,000 = Rs.1,80,000Average Profit = Sum of profits/Total number of years = (Rs.60,000 + Rs.1,20,000 + Rs.1,80,000)/3 = Rs.3,60,000/3 = Rs.1,20,000. Goodwill = Average Profit X Number of years purchase = Rs.1,20,000 X 1 = Rs.1,20,000. Hence, the correct option is 2.
Question : The profits of last three years are Rs.4,20,000, Rs.3,90,000 and Rs.4,50,000. Capital employed is Rs.40,00,000 and normal rate of return is 10%. The amount of goodwill calculated on the basis of super profit method for three years of purchase will be:
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Question : Profits of last three years are Rs.4,20,000, Rs.3,90,000 and Rs.4,50,000. The value of goodwill on the basis of two years purchase of three year average profit is:
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