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 profit = 20,000
No of years purchase = 3 years
Goodwill = Average profit x No of years purchase
= 20,000 x 3
= 60,000