Question

Goodwill is to be calculated at one and a half years purchase of average profit for the last 5 years. The firm earned the profit during the first 3 years as, Rs. 20,000 , Rs. 18,000 and 2,000 and 5,000 in last 2 years, goodwill amount will be:

• A. Rs. 12,000
• B. Rs. 10,000
• C. Rs. 15,000
• D. None of the above

Answer 1

The correct option is C Rs. 15,000

Average profits of 5 year= 20000 + 18000 +2000 +5000 +5000/5

= 10000

Calculation of Goodwill = 10000* 1.5

= 15000