Madhu and Vidhi are partners sharing profits in the ratio of 3 : 2. They decided to admit Manu as a partner from 1st April 2023 on the following terms:

(i) Manu will be given a 2/5th share of the profit.

(ii) Goodwill of the firm will be valued at two years’ purchase of three years’ normal average profit of the firm.

Profits of the previous three years ended 31st March were:

2023 – Profit ₹ 30,000 (after the debiting loss of stock by fire ₹ 40,000).

2022 – Loss ₹ 80,000 (includes voluntary retirement compensation paid ₹ 1,10,000).

2021 – Profit ₹ 1,10,000 (including a gain (profit) of ₹ 30,000 in the sale of fixed assets).

Calculate the value of goodwill.

[Ans.: Goodwill – ₹ 1,20,000.]

Anurag Pathak Changed status to publish April 17, 2023
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