The past average profits of a business works out at ₹20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be.........
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹60,000.
Average profits = 20,000
no of years purchase = 3
Goodwill = Average profits x no of years purchase
= 20,000 x 3
= 60,000