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Question 16 Chapter 3 - Unimax Class 12 Part 1
16. Goodwill is to be valued at two years’ purchase of 3 years normal average Profits of the firms. The Profits for 2018 is Rs. 20000 (including insurance claim received of Rs. 35000). The loss of 2019 is Rs. 15000 (including voluntary retirement compensation paid Rs. 105000). The Profit for 2020 is Rs. 75000 (including a profit of Rs. 30000 on sale of fixed assets). Calculate the value of goodwill as on 1.1.2021.
| Rs. | Rs. | |
| Profit for the year 2018 | 20000 | |
| Less Insurance claim (already added) | 35000 | (15000) |
| Loss for the year 2019 | 15000 | |
| Add Voluntary retirement | 105000 | 90000 |
| Compensation (already deducted) | ||
| Profit for the year 2020 | 75000 | |
| Less Profit on sale of fixed assets | 30000 | 45000 |
| Total net profits for 3 years | 120000 |
Average Profits = Rs. 120000/3= Rs. 40000
Goodwill = Average Profits X Number of years of purchase
= Rs. 40000 X 2
= Rs. 80000
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