The profit for the years ending on $31^{s t}$ March are as follows:
Year $2014 - R s . 4, 00, 000; 2015 - R s . 3, 98, 000; 2016 - R s . 4, 50, 000; 2017 - R s . 4, 45, 000$ and $2017 - R s . 5, 00, 000$
Calculate goodwill of the firm on the basis of $4$ years purchase of $5$ years average profit.

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Solution

Step 1:
Calculation of Average Profit:
Average Profit= [400000+398000+450000+445000+500000]/ 5
= 438600
Step 2:
Calculation of Goodwill:
Goodwill= 438600* 4
= 1754400

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The profit for the years ending on 31stMarch are as follows:Year 2014−Rs.4,00,000;2015−Rs.3,98,000;2016−Rs.4,50,000;2017−Rs.4,45,000 and 2017−Rs.5,00,000Calculate goodwill of the firm on the basis of 4 years purchase of 5 years average profit.

Step 1: Calculation of Average Profit:Average Profit= [400000+398000+450000+445000+500000]/ 5 = 438600Step 2:Calculation of Goodwill:Goodwill= 438600* 4 = 1754400

The profit for the years ending on $31^{s t}$ March are as follows:
Year $2014 - R s . 4, 00, 000; 2015 - R s . 3, 98, 000; 2016 - R s . 4, 50, 000; 2017 - R s . 4, 45, 000$ and $2017 - R s . 5, 00, 000$
Calculate goodwill of the firm on the basis of $4$ years purchase of $5$ years average profit.

Step 1:
Calculation of Average Profit:
Average Profit= [400000+398000+450000+445000+500000]/ 5
= 438600
Step 2:
Calculation of Goodwill:
Goodwill= 438600* 4
= 1754400