The profits of a partnership firm over five years are recorded as follows:YearProfit (Rs.)2012–1320,0002013–1424,0002014–1520,0002015–1620,0002016–171 - Accountancy MCQ CUET Accountancy 2026 | ExamTest.live

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The profits of a partnership firm over five years are recorded as follows:YearProfit (Rs.)2012-1320,0002013-1424,0002014-1520,0002015-1620,0002016-1716,000Calculate the value of goodwill on the basis of three years' purchase of average profits.

Solution & Step-by-step Explanation

Let us compute the valuation step by step:Calculate the Cumulative Total Profits: Total Profit = 20, 000 + 24, 000 + 20, 000 + 20, 000 + 16, 000 = Rs. 1, 00, 000 Calculate the Average Annual Profit: Average Profit = \frac{Total Profit}{Number of Years} = \frac{1 , 00 , 000}{5} = Rs. 20, 000 Calculate the Goodwill Value: Goodwill = Average Profit \times Number of Years’ Purchase Goodwill = 20, 000 \times 3 = Rs. 60, 000

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The profits of a partnership firm over five years are recorded as follows:YearProfit (Rs.)2012-1320,0002013-1424,0002014-1520,0002015-1620,0002016-1716,000Calculate the value of goodwill on the basis of three years' purchase of average profits.

Rs. 20,000

Rs. 40,000

Rs. 60,000

Rs. 70,000

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