OMTEX CLASSES: Calculate the value of goodwill according to average profit method. Goodwill is valued at three years purchase of last four year average profit. The profits and losses for the last four years are. [Ans. Rs. 27,000]

Calculate the value of goodwill according to average profit method. Goodwill is valued at three years purchase of last four year average profit. The profits and losses for the last four years are. [Ans. Rs. 27,000]

1^st Year Rs,	10,000(Profit)
2^nd Year Rs,	12,000(Profit)
3^rd Year Rs,	4,000(Loss)
4^th Year Rs,	18,000(Profit)

SOLUTION:

M/S ___________________________________

VALUATION OF GOODWILL

AVERAGE PROFIT METHOD

GOODWILL = (AVERAGE PROFIT) (NUMBER OF YEARS PURCHASE)

WHERE : AVERAGE PRFIT = (10000 + 12000 - 4000 + 18000)/4

= 36000/4

Average Profit = Rs. 9000

GOODWILL = 9000 × 3

GOODWILL = Rs. 27000

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Calculate the value of goodwill according to average profit method. Goodwill is valued at three years purchase of last four year average profit. The profits and losses for the last four years are. [Ans. Rs. 27,000]