Calculate the value of goodwill on the basis of three year's purchase of the weighted
Channel: Doubtnut
Date: 2020-04-26

Calculate the value of goodwill on the basis of three year's purchase of the weighted average profits of the last five years. Profits to be weighted 1, 2, 3, 4 and 5, the greatest weightage to be given to last year. Profits of the last five years were:  `{:("Year ended",," Rs.",),("31st March, 2015 :","Profit","80,000",),("31st March, 2016 :","Profit","1,05,000",("after considering abnormal loss of Rs. 41,500")),("31st March, 2017 :","Loss","20,000",("after considering abnormal gain of Rs. 40,000")),("31st March, 2018 :","Profit","1,80,000",),("31st March, 2019 :","Profit","2,00,00",):}`  Books of Accounts of the firm revealed that :  (i) Closing Stock as on 31st March, 2015 was  overvalued by Rs. 40,000.  (ii) Reparirs to Machinery Rs. 60,000 were wrongly debited to Machinery  Account on 1st July, 2017. Depreciation was chared on Machienery @ 20% p.a. on diminishing balance method.