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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:

Option 1: Rs.3,60,000

Option 2: Rs.12,60,000

Option 3: Rs.8,40,000

Option 4: Rs.4,20,000


Team Careers360 18th Jan, 2024
Answer (1)
Team Careers360 20th Jan, 2024

Correct Answer: Rs.8,40,000


Solution : Average profit = Sum of profits/Total number of years = (Rs.4,20,000 + Rs.3,90,000 + Rs.4,50,000)/3 = Rs.4,20,000.
Goodwill = Average Profit X Number of years purchase = Rs.4,20,000 X 2 = Rs.8,40,000.
Hence, the correct option is 3.

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