The following particulars are available in respect of a business carried on by a partnership firm.
A. Profits earned 2016 – 30,000; 2017 – 29,000; 2018 – 32,000.
B. Profit of 2016 includes a non-recurring income of Rs 3,000.
C. Profit of 2017 is reduced by Rs 2,000 due to stock destroyed by fire.
D. The stock is not insured. But it is decided to insure the stock in future. The insurance premium is estimated at Rs 5,600 p.a. You are required to calculate the value of goodwill on the basis of 2 years purchase of average profit of the last three years.
Answer:C
The following particulars are available in respect of a business carried on by a partnership firm.
A. Profits earned 2016 – 30,000; 2017 – 29,000; 2018 – 32,000. B. Profit of 2016 includes a non-recurring income of Rs 3,000. C. Profit of 2017 is reduced by Rs 2,000 due to stock destroyed by fire. D. The stock is not insured. But it is decided to insure the stock in future. The insurance premium is estimated at Rs 5,600 p.a. You are required to calculate the value of goodwill on the basis of 2 years purchase of average profit of the last three years.