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easyMCQCUET Accountancy 2025 16 May Shift 12026CUET Accountancy
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Under which method is the "Number of Years' Purchase" not considered for goodwill valuation?

  1. A
    Simple Average Method
  2. B
    Weighted Average Method
  3. C
    Super Profit Method
  4. D
    Capitalization Method

Solution & Step-by-step Explanation

under the Capitalization Method, goodwill is evaluated by capitalizing either the average or super profits based on the normal rate of return. The formula used is:

or

Thus, the "Number of Years' Purchase" factor is entirely absent from its calculation, whereas Simple Average, Weighted Average, and Super Profit methods all rely directly on multiplying a calculated profit figure by the number of years' purchase.

Practice this question

Try it yourself before checking the explanation above.

Under which method is the "Number of Years' Purchase" not considered for goodwill valuation?
A
Simple Average Method
B
Weighted Average Method
C
Super Profit Method
D
Capitalization Method

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