While calculating goodwill by weighted average profits methods, total profits multiplied by weights are divided by___

Total of weights

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Total of weights

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No of years of purchase

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Total no of years

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Solution

The correct option is B
Total of weights

Weight Average Profit = Total Profits (multiplied with weights) / Total weights

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Similar questions

P. Ltd. proposed to purchase the business carried on by Mr. A. Goodwill for this purpose is agreed to be valued at three years purchase of the weighted average profits of the past four years.

The appropriate weights to be used are:

2001 - 1

2002 - 2

2003 - 3

2004 -4

The profit for the year as follows:

2001 - Rs 1,01,000

2002 - Rs 1,24,000

2003- Rs 1,00,000

2004- Rs 1,50,000

Q. 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.

The profits of a firm for the last two years are Rs. 45,000 and Rs.30,000. What would be the value of goodwill on the basis of 1 years purchase of the weighted average profits ?

Q. Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3 : 2. They admit Ramesh into partnership for 1/4th share in profits. Ramesh brings in his share of goodwill in cash. Goodwill for this purpose shall be calculated at two years' purchase of the weighted average normal profit of past three years. Weights being assigned to each year 2017−1; 2018−2 and 2019−3. Profits of the last three years were:
2017 − Profit ₹ 50,000 (including profits on sale of assets ₹ 5,000).
2018 − Loss ₹ 20,000 (including loss by fire ₹ 35,000).
2019 − Profit ₹ 70,000 (including insurance claim received ₹ 18,000 and interest on investments and dividend received ₹ 8,000).
Calculate the value of goodwill. Also, calculate the goodwill brought in by Ramesh.

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.

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While calculating goodwill by weighted average profits methods, total profits multiplied by weights are divided by___

The correct option is B Total of weights Weight Average Profit = Total Profits (multiplied with weights) / Total weights

The correct option is B
Total of weights

Weight Average Profit = Total Profits (multiplied with weights) / Total weights