Calculate value of goodwill on the basis of three years purchase of average profit of the preceding five years were as follows:
year 2017-18 2016-17 2015-16 2014-15 2013-14
Profits(Rs) $8, 00, 000$ $15, 00, 000$ $18, 00, 000$ $4, 00, 000$ (Loss) $13, 00, 000$

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Solution

Calculation of goodwill :
(1) Average profit = Total profit/ No. of years
Average profit = Rs. (800000 + 1500000 + 1800000 - 400000 + 1300000) / 5
Average profit = Rs. 5000000/5
Average profit = Rs. 1000000
Goodwill = Average profit * No. of year's purchase
Goodwill = Rs. 1000000 * 3
Goodwill = Rs.3000000

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Profits (₹)	8,00,000	15,00,000	18,00,000	4,00,000 (Loss)	13,00,000

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year	2017-18	2016-17	2015-16	2014-15	2013-14
Profits(Rs)	$8, 00, 000$	$15, 00, 000$	$18, 00, 000$	$4, 00, 000$ (Loss)	$13, 00, 000$

Calculate value of goodwill on the basis of three years purchase of average profit of the preceding five years were as follows:year2017-182016-172015-162014-152013-14Profits(Rs)8,00,00015,00,00018,00,0004,00,000(Loss)13,00,000

Calculate value of goodwill on the basis of three years purchase of average profit of the preceding five years were as follows:
year 2017-18 2016-17 2015-16 2014-15 2013-14
Profits(Rs) $8, 00, 000$ $15, 00, 000$ $18, 00, 000$ $4, 00, 000$ (Loss) $13, 00, 000$