State the order of steps required for valuation of goodwill using weighted average profit method.

A) Assign weights to each year's profit/loss
B) Multiply weighted average profit with number of years purchase
C) Find goodwill
D) Calculate adjusted profit
E) Calculate weighted average profit

Choose the correct answer from the options given below.

D, A, E, B, C

The correct answer is option 4- D, A, E, B, C.

The correct sequence of calculating the value of goodwill through the weighted average profit method is as follows-

*D) Calculate adjusted profit- Firstly if there is any abnormal gain or loss then it is deducted or added respectively from the particular year's profit.

*A) Assign weights to each year's profit/loss-  Weights are assign to all years in the numbering from 1,2,3 and so on. Higher weight is provided to the latest year's profit.

*E) Calculate weighted average profit-  Now the weights assigned to year's profit and adjusted profit is multiplied to find out the product. After that total of the product and weights is done and then the total of product is divided by the total no of weights to find out the weighted average profit.

*B) Multiply weighted average profit with number of years purchase- At last multiply the weighted average profit with no of years purchase.

*C) Find goodwill- By doing the previous step, we will get value of goodwill of the partnership firm.