Question

X,Y and Z are three partners in a firm.They are sharing profit and loss in the ratio of 3:2:1.On 11th Jan Y died. The firm decided to value goodwill based on 3 years purchase of weighted average of 5 years profit.The trading profit of the firm for the past five years before charging interest on capital was as under Rs.10,000,Rs.9,000,Rs.11,000,Rs.7,000,Rs.8,000. The capital of the firm stood Rs.50,000 and interest on capital of the firm stood Rs.50,000 and interest on capital is given at 8%. What is Y's share of goodwill?

• A. Rs.15,000
• B. Rs.9,000
• C. Rs.10,000
• D. Rs.7,500

Answer 1

The correct option is B Rs.9,000

average profit =10000+9000+11000+7000+8000/5

=45000/5=9000

goodwill =9000*3=27000

Y's share of goodwill=27000*2/6=9000