Question

The profits of last three years are $Rs.42,000$; $Rs.39,000$ and $Rs.45,000$. Find the goodwill of $2$ years purchase.

• A. $Rs.42,000$
• B. $Rs.84,000$
• C. $Rs.1,26,000$
• D. $Rs.36,000$

Answer 1

The correct option is B $Rs.84,000$

Calculation of goodwill :

1. Average profit = Total profit/ No. of years

Average profit = Rs. (42000 + 39000 + 45000)/ 3

Average profit = Rs. 126000/3

Average profit = Rs. 42000

2. Goodwill = Average profit * No. of years purchase

Goodwill = Rs. 42000 * 2

Goodwill = Rs. 84000