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Question
Give the formula used for calculating goodwill of a partnership firm by the Weighted Average Profit Method.
Answer in Brief
Solution
The formula used for calculating goodwill of a partnership firm by the weighted average profit method is:
Weighted Average Profit = `"Total of Products of Profits"/"Total of Weights"`
Goodwill = Weighted Average Profit × Number of Year's Purchase
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Weighted Average Method
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