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Question
Find out the value of goodwill at three years purchase of weighted average profit of last four years.
| Year | Profit ₹ |
Weight |
| 2015 | 10,000 | 1 |
| 2016 | 12,000 | 2 |
| 2017 | 16,000 | 3 |
| 2018 | 18,000 | 4 |
Solution
Calculation of weighted average profit
| Year | Profit (₹) |
Weight | Amount (₹) |
| 2015 | 10,000 | 1 | 10,000 |
| 2016 | 12,000 | 2 | 24,000 |
| 2017 | 16,000 | 3 | 48,000 |
| 2018 | 18,000 | 4 | 72,000 |
| Total | 10 | 1,54,000 |
Weighted average profit = `"Total of weighted profits"/"Total of weights"`
= `154000/10`
= ₹ 15,400
Goodwill = Weighted average profit × No. of years purchase
= ₹ 15,400 × 3
= ₹ 46,200
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Assets | Amount (₹) |
|
| Capital A/cs: | Land and Building | 10,00,000 | ||
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