1.

Goodwill of the firm is valued at two years purchase of average profits of last 4 years. The total profits for the last 4 years are Rs. 80,000. Calculate the goodwill of the firm.

Answer»

Goodwill = Average profit of last 4 years × No. of years of purchase 

= Rs. 20,000 × 2 years = Rs. 40,000.

Average profit = Total profit/No.of years

= 80,000/4 

= 20,000.



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