Profits of a firm for the year ended 31st March for the last five years were:

Year Ended 31st March, 2015 31st March, 2016 31st March, 2017 31st March, 2018 31st March, 2019

Profits (₹) 20,000 24,000 30,000 25,000 18,000

Calculate value of goodwill on the basis of three years' purchase of Weighted Average Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for years ended 31st March, 2015, 2016, 2017, 2018 and 2019.

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Solution

Year

Profit

×

Weight

=

Product

2015

20,000

×

1

=

20,000

2016

24,000

×

2

=

48,000

2017

30,000

×

3

=

90,000

2018

25,000

×

4

=

1,00,000

2019

18,000

×

5

=

90,000

Total

15

3,48,000

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Similar questions

Q. Profits of a firm for the year ended 31st March for the last five years were:

Year ended	31st March, 2014	31st March, 2015	31st March, 2016	31st March, 2017	31st March, 2018
Profit (₹)	20,000	24,000	30,000	25,000	18,000

Calculate value of goodwill on the basis of three years' purchase of Weighted Average Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for years ended 31st March, 2014, 2015, 2016, 2017 and 2018.

The profits of a firm for the year ended 31st March for the last 2 years were as under :

2017 - Rs. 12,000

2018 - Rs.14,400

What would be the value of goodwill on the basis of 3 years purchase of the weighted average profits of the last two years, assuming weight of 1 and 2 are assigned to 2017 and 2018 respectively ?

Q. Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits of last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively to profits for the year ended 31st March, 2015 to 2019. The profits for these years were: ₹ 70,000, ₹ 1,40,000, ₹ 1,00,000, ₹ 1,60,000 and ₹ 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(i) There was an abnormal loss of ₹ 20,000 in the year ended 31st March, 2015.
(ii) There was an abnormal gain (profit) of ₹ 30,000 in the year ended 31st March, 2016.
(iii) Closing Stock as on 31st March, 2018 was overvalued by ₹ 10,000.
Calculate the value of goodwill.

The profits of a firm for the year ended $31^{s t}$ March for the last five years were as follows:

$\begin{matrix} Year & Profit (in Rs) 1999 & 20, 000 2000 & 24, 000 2001 & 30, 000 2002 & 25, 000 2003 & 18, 000 \end{matrix}$

Calculate the value of goodwill on the basis of $3$ year's purchase of weighted average profit after weights $1, 2, 3, 4$ and $5$ respectively.

Q. Goodwill is to be valued at three years' purchase of four years' average profit. Profits for last four years ending on 31st March of the firm were:
2016 − ₹ 12,000; 2017 − ₹ 18,000; 2018 − ₹ 16,000; 2019 − ₹ 14,000.
Calculate amount of Goodwill.

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Year	Profit	×	Weight	=	Product
2015	20,000	×	1	=	20,000
2016	24,000	×	2	=	48,000
2017	30,000	×	3	=	90,000
2018	25,000	×	4	=	1,00,000
2019	18,000	×	5	=	90,000
Total			15		3,48,000

Year Profit × Weight = Product 2015 20,000 × 1 = 20,000 2016 24,000 × 2 = 48,000 2017 30,000 × 3 = 90,000 2018 25,000 × 4 = 1,00,000 2019 18,000 × 5 = 90,000 Total 15 3,48,000

Year

Profit

×

Weight

=

Product

2015

20,000

×

1

=

20,000

2016

24,000

×

2

=

48,000

2017

30,000

×

3

=

90,000

2018

25,000

×

4

=

1,00,000

2019

18,000

×

5

=

90,000

Total

15

3,48,000