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

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The past average profits of a business work out to 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 is calculated as follows: Goodwill = Average Profit \times Number of Years’ Purchase Goodwill = 20, 000 \times 3 = Rs. 60, 000

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The past average profits of a business work out to 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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