Under average profits method, goodwill is valued at agreed number of ________ purchase of the average profits of the past few years.
A
months
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B
years
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C
days
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D
both a and c
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Solution
The correct option is D years Average profits method is based on the assumption that a new business does not earn any profits during the first few years of its operations. Under this method, the goodwill is valued at agreed number of years purchase of the average profits of past few years.