1.

Goodwill of the firm is valued at two years purchase of the average profit of last four years. The total profits for last four years is ? 40,000. Calculate the goodwill of the firm.

Answer»

Calculation of Good will: 

Good will = Average profit of last 4 year x Number of years of purchase of Average profits.

Average profits = 40,000/4 = Rs. 10000

Good will = Rs. 10,000 × 2 year purchase 

= Rs. 20,000



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