From the following information calculate Goodwill on the basis of three years purchase of last 5 years' profit.
Years Profits
2017 15000 ( including an abnormal gain of Rs 3,000)
2018 20,000
2019 18000 (including a loss due to fire of RS 2,000)
2020 30,000
2021 2000 (Loss)
Answer & explanation
Correct answer: option 2
"2017- 15,000 - 3,000 = 12,000
2018 - 20,000
2019 - 18,000 + 2,000 = 20,000
2020 - 30,000v 2021 - (2,000)
AP = 80,000/5 = 16,000v Goodwill = AP * No. of years purchased
= 16,000 * 3 = 48,000 "