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Question
A and B are partners sharing profits in the ratio of 3 : 2. They decided to admit C as a partner from 1st April, 2018 on the following terms:
(i) C will be given a 2/5th share of the profit.
(ii) Goodwill of the firm be valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
Goodwill of the firm on the basis of average profit of past three years is:
[2 marks]
A and B are partners sharing profits in the ratio of 3 : 2. They decided to admit C as a partner from 1st April, 2018 on the following terms:
(i) C will be given a 2/5th share of the profit.
(ii) Goodwill of the firm be valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
Goodwill of the firm on the basis of average profit of past three years is:
[2 marks]
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Solution
The correct option is C ₹60,000
Goodwill = Average Profit x Number of Years Purchase
= ₹30,000 x 2
= ₹60,000
Goodwill = Average Profit x Number of Years Purchase
= ₹30,000 x 2
= ₹60,000
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