The past average profits of a business work out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years. The - Accountancy MCQ CUET Accountancy 2025 22 May Shift 2 2026 | ExamTest.live

easyMCQCUET Accountancy 2025 22 May Shift 22026Accountancy

1 mark

The past average profits of a business work out at Rs. 20, 000 and it is expected that such profits are likely to continue for another three years. The value of goodwill based on the average profit method will be _________.

Solution & Step-by-step Explanation

Under the Average Profit Method: Goodwill = Average Profit \times Number of Years’ Purchase Given: Average Profit = Rs. 20, 000 Number of Years’ Purchase = 3 Substituting the values: Goodwill = 20, 000 \times 3 = Rs. 60, 000

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The past average profits of a business work out at Rs. 20, 000 and it is expected that such profits are likely to continue for another three years. The value of goodwill based on the average profit method will be _________.

Rs. 60,000

Rs. 20,000

Rs. 40,000

Rs. 50,000

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