Answer this ASAP pls
Solution:
Average Profit = [125000 +125000 +187500 + (62500) +125000] /5
= 500000 /5
= Rs 100000
Goodwill = Average Profit x No. of purchase year
= 100000 x 3
= Rs 300000
Year | Profit | Adjustment | Normal Profit |
2018 | 125000 | 125000 | |
2019 | 100000 | 25000 (abnormal loss) | 125000 |
2020 | 187500 | 187500 | |
2021 | (62500) | (62500) | |
2022 | 125000 | 125000 | |
Average Profit = [125000 +125000 +187500 + (62500) +125000] /5
= 500000 /5
= Rs 100000
Goodwill = Average Profit x No. of purchase year
= 100000 x 3
= Rs 300000