# Question 04 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 04 Chapter 3 of +2-A

4. Calculate the value of a firm’s goodwill on the basis of one and a half years’
purchase of the average profit of the last three years. The profit for the first year was 1,00,000, profit for the second
year was twice the profit of the first year and for the third year, profit was one and half times of the profit of the second year.

The solution of Question 04 Chapter 3 of +2-A

:

 Average Profit = Total Profit for past given years*1 Number of years
 Average Profit = 1,00,000+2,00,000+3,00,000 3

 = 6,00,000 3 = 2,00,000

Number of years’ purchase = 1.5

 Goodwill = Average Profit X Number of years’ purchase Goodwill = 2,00,000 X 1.5 Goodwill = 3,00,000

Working Note: –

*1 Calculation of Profits of last three years

 1st year’s Profit = 1,00,000  (Given) 2nd year’s Profit = Twice the profit of the first year = 1,00,000 X 2 = 2,00,000 2nd year’s Profit = one and half times the profit of the second year = 2,00,000 X 1.5 = 3,00,000

Also, Check out the solved question of previous Chapters: –

### T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

### T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement