The profits of the firm for the five years are as follows:
| Year | Profit (Rs.) |
| 2012-13 | 20,000 |
| 2013-14 | 24,000 |
| 2014-15 | 30,000 |
| 2015-16 | 25,000 |
| 2016-17 | 18,000 |
Calculate the value of goodwill on the basis of three years' purchase of weighted average profits based on weights of the last five years as 1,2,3,4 and 5 respectively.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 69,600
A weighted average gives more weight to recent years. Each year’s profit is multiplied by its weight, the products are added, and the total is divided by the total of the weights.
2012-13: Rs. 20,000 × 1 = Rs. 20,000
2013-14: Rs. 24,000 × 2 = Rs. 48,000
2014-15: Rs. 30,000 × 3 = Rs. 90,000
2015-16: Rs. 25,000 × 4 = Rs. 1,00,000
2016-17: Rs. 18,000 × 5 = Rs. 90,000
Total of products = Rs. 3,48,000; total of weights = 15
Weighted average profit = Rs. 3,48,000 ÷ 15 = Rs. 23,200
Goodwill = Rs. 23,200 × 3 = Rs. 69,600
NCERT (2026-27 edition):
|
