The profits of a firm for 5 years are as follow:

Calculate Goodwill on the basis of 3 years purchase of weighted average profits of last five years based on weights 1, 2, 3, 4 and 5 respectively.

₹69,600

The correct answer is Option (2) → ₹69,600

Weighted average profit = Weighted total profit/ Total of weights

Weighted Average Profit = (Profit for 2012-13 × 1) + (Profit for 2013-14 × 2) + (Profit for 2014-15 × 3) + (Profit for 2015-16 × 4) + (Profit for 2016-17 × 5)/(1 + 2 + 3 + 4 + 5)

= (20,000 × 1) + (24,000 × 2) + (30,000 × 3) + (25,000 × 4) + (18,000 × 5)/(1 + 2 + 3 + 4 + 5)

= (20,000) + (48,000) + (90,000) + (100,000) + (90,000) / (15)

= 348,000 / 15

= ₹23,200

Goodwill = Weighted Average Profit × Number of Years' Purchase
             = ₹23,200 × 3
             = ₹69,600