The profit for the five years of a firm are as follows-year 2013 Rs. 4,00,000; year 2014 Rs. 3,98,000; year 2015 Rs. 4,50,000; year 2016 Rs. 4,45,000 and year 2017 Rs. 5,00,000. The goodwill of the firm on the basis of 4 years purchase of 5 years average profits is-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 17,54,400
Total Profits=Rs. 4,00,000+Rs. 3,98,000+Rs. 4,50,000+Rs. 4,45,000+Rs. 5,00,000=Rs. 21,93,000
Average Profit=21,93,000/ 5 = 4,38,600
Goodwill=Average Profit×Number of Years’ Purchase = 4,38,600×4=17,54,400