A firm has profits for the years as follows-
2019- Rs 5,000, (including loss by fire of Rs 1,000)
2020 - Rs 10,000 (including gain on fixed asset of Rs 4000)
2021 -and Rs 3000
Calculate firm's goodwill on the basis of three years purchase.
Answer & explanation
Correct answer: option 3
Average Profit = (5000+1000) + (10000-4000) + 3000 = 15000/3 = 5000
Goodwill = AP * No. of years purchased
= 5000 * 3 = 15000