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Calculate Value of Goodwill On the Basis of Three Years' Purchase of Average Profit of the Preceding Five Years :- Accountancy

Calculate value of goodwill on the basis of three years' purchase of average profit of the preceding five years which were as follows
Calculate value of goodwill on the basis of three years' purchase of average profit of the preceding five years which were as follows:


Year2018-192017-182016-172015-162014-15
Profits (₹)8,00,00015,00,00018,00,0004,00,000
(Loss)		13,00,000




Goodwill = Average Profit ☓ Number's of year Purchase
Average Profit = `"Total Profit for past given Years"/"Number of Years"`

= Rs. `frac{8,00,000 + 15,00,000 + 18,00,000 - 4,00,000 + 13,00,000}{5}`

= Rs. `"50,00,000"/5`

= Rs.10,00,000

Given, Numbers of year purchase = 3
∴ Goodwill = Average Profit ☓ Numbers of year purchase
= 10,00,000 ☓ 3
= Rs. 30,00,000

Chapter-3 Goodwill: Nature and Valuation-TS.Grewal



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