Sonu and Sumit are partners sharing profits and losses in the ratio 3 : 2. They admit Sahil as a partner for 1/5th share. For this purpose, goodwill of the firm is to be valued on the basis of 3 year’s purchase of last 4 year’s average profit. Profits for the last four years ended on 31st March were as follows:

Year Profits (₹)
2020 7,00,000 (including an Abnormal Gain of ₹ 50,000)
2021 2,50,000 (after charging an Abnormal Loss of ₹ 69,950)
2022 6,10,000
2023 4,50,000

Following additional information is made available:

i) On 1st October, 2020, the firm had purchased a computer for ₹ 3,00,000 and it was debited to stationery expenses. Depreciation is to be charged on computer @ 10% p.a. on Diminishing Balance Method.

ii) Closing Stock of 2021 and 2022 were overvalued by ₹ 30,000 and ₹ 20,000 respectively.

iii) To cover the Operating Cost, an annual charge of ₹ 45,000 should be made for the purpose of goodwill valuation.

Calculate goodwill of the firm.

Anurag Pathak Changed status to publish May 3, 2024
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