Formula for calculation of goodwill according to average profits method is:

Goodwill = Average Profits - Number of years of purchase

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Goodwill = Average Profits + Number of years of purchase

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Goodwill = Average Profits X Number of years of purchase

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Goodwill = Average Profits / Number of years of purchase

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Solution

The correct option is C
Goodwill = Average Profits X Number of years of purchase

According to average profits method,

Goodwill = Average Profits * Number of years of purchase

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Similar questions

Profits of last four years are 12,000, 16,000, 23,000, 27,000 respectively. Calculate goodwill based on average profits of 2 years purchase

R s .50000

R s .75000

2

5, 00, 000

2

= R s . 2, 50, 000 + . . . . . + R s . 3, 00, 000 - R s . 1, 00, 000 + R s . 3, 50, 000 = R s . . . .

= \frac{T o t a l P r o f i t s}{N u m b e r O f Y e a r s} = \frac{R s .}{5} =

= R s . . . . . \times 2 = R s . 5, 00, 000

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