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Ayub and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April 2023.

They agreed to value goodwill at 3 years’ purchase of super profit method for which they decided to average profit of last 5 years.

The profits for the last 5 years were:

Year Ended Net Profit (₹)
31st March 2020 1,50,000
31st March 2021 1,80,000
31st March 2022 1,00,000 (including abnormal loss of ₹ 1,00,000)
31st March 2022 2,60,000 (including abnormal gain (profit) of ₹ 40,000)
31st March 2019 2,40,000

The firm has total assets of ₹ 20,00,000 and Outside Liabilities of ₹ 5,00,000 as on that date Normal Rate of Return in similar businesses is 10%.

Calculate the Value of Goodwill.

Anurag Pathak Changed status to publish April 18, 2023