The Weighted average method of calculating goodwill is used in which of the following cases?
Answer & explanation
Correct answer: option 4
Sometimes, if there exists an increasing on decreasing trend, it is considered to be better to give a higher weightage to the profits to the recent years than those of the earlier years. Hence,
it is a advisable to work out weighted average based on specified weights like 1, 2, 3, 4 for respective year’s profit.