# Question 04 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Q-4 - CH-3 - Usha +2 Book 2018 - Solution

Question 04 Chapter 3 of +2-Part-1

4. (Average Profit Method) Rani purchased Vani’s business on 31st March 2015. The profit disclosed by Vani business for the last three years were as follows:
Year
2013: Rs.40,000 (including an abnormal gain Rs.5,000)
2014: Rs.50,000(after charging an abnormal loss of Rs.10,000)
2015: Rs.45,000(excluding Rs.5,000 as insurance premium of firms property now to be insured)
Calculate the value of firm’s Goodwill on the basis of 2 years purchase of the average profit for the last three years.

## The solution of Question 04 Chapter 3 of +2 Part-1: –

 Calculation of Weighted Average Profit Year Adjusted Profit (A) Weight (D) Product (E = C * D) 2013 40,000 -5,000 35,000 2014 50,000 10,000 60,000 2015 45,000 – 5,000 40,000 Total 15 6,00,000
 Average Profit = Total Profit for past given years Number of years = 35,000 + 60,000 + 40,000 3 = 1,35,000 3 = 45,000

 Number of years’ purchase = 2 Goodwill = Average Profit X Number of years’ purchase Goodwill = 45,000 X 2 Goodwill = 90,000

Working Note : –

*1 Calculation of Profits of last three years

 Adjusted Profit for the year 2013 = Total Profit −Abnormal Gain = 40,000 -5,000 = 35,000

 Adjusted Profit for the year 2014 = Total Profit +Abnormal Loss = 50,000 +10,000 = 60,000

 Adjusted Profit for the year 2015 = Total Profit −Indirect Expenses = 45,000 -5,000 = 40,000

Comment if you have any questions.

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