Asin and Shreyas were partners sharing profits and losses in a ratio of 2 : 1.

They admitted Shyam as a partner for 1/5th share in profits.

For this purpose, the Goodwill of the firm was to be valued on the basis of three years’ purchase of the last five years’ average profit.

Profits for the last five years ended 31st March were:

Year Profit (₹)
2019 1,25,000
2020 1,00,000
2021 1,87,500
2022 (62,500)
2023 1,25,000

Calculate the Goodwill of the firm after adjusting the following:

Profit of 2019-20 was calculated after charging ₹ 25,000 for abnormal loss of goods by fire.

[Ans.: Goodwill – ₹ 3,00,000]

Anurag Pathak Changed status to publish April 17, 2023
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