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Q.5) Calculate goodwill of a firm on the basis of three year’s purchase of the weighted average profits of the last four
years. The profit of the last four years were:
Year Profits Weights
31-3-2020: ₹20,200 1
31-3-2021: ₹24,800 2
31-3-2022: ₹20,000 3
31-3-2023: ₹30,000 4
You are supplied the following information:
a) On September 1, 2022 a major plant repair was undertaken for ₹6,000, which was charged to revenue. The said
sum is to be capitalized for goodwill calculation subject to adjustment of depreciation of 10% p.a. on reducing
balance method.
b) The closing stock for the year 2020-2021 was overvalued by ₹2,400.
c) To cover management cost an annual charge of ₹4,800 should be made for purpose of goodwill valuation.

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