The Profit for the five years of a firm are as follows ₹4,00,000, ₹3,98,000, ₹4,50,000, ₹4,45,000 and ₹5,00,000. Calculate goodwill of the firm on the basis of 4 years purchase of 5 years average profit.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹17,54,400
Under the average profits method, goodwill = average profit × number of years’ purchase.
Total profit = 4,00,000 + 3,98,000 + 4,50,000 + 4,45,000 + 5,00,000
= ₹21,93,000
Average profit = 21,93,000 ÷ 5 = ₹4,38,600
Goodwill = 4,38,600 × 4 = ₹17,54,400
NCERT (2026-27 edition):
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