Calculate goodwill of a firm on the basis of 3years purchase of the weighted average profits of the last 4years the profit of 4years 2012 20200 2013 24800 2014 20200 2015 30000 the weight to each year 2012 1 2013 2 2014 3 2015 4?

Question

Answer

Year ended weighted profit
31 Mar 2012 20200*1= 20200
31mar 2013 24800*2= 49600
31 Mar 2014. 20200*3= 60600
31 mar 2015 30000*4=. 120000

total = 142400
weighted profit =
total weighted profit/ no of weigheted profit
142400/10
=14240
Goodwill= weighted profit * no of year purchased
= 14240*3
= 42720

Answer

2012= 20200×1=20200
2013=24800×2=39600
2014=20200×3=60600
2015=30000×4=120000
total weighted profit = 20200+39600+60600+120000=240400
Goodwill= total weighted profit ÷ total weight
=240400÷ (1+2+3+4)
=240400÷ 10
=24040 answer

Answer

Calculation of Goodwill

To calculate the goodwill of a firm based on the weighted average profits of the last four years, we need to follow a few steps:

Step 1: Assign weights to each year

The weights assigned to each year determine the importance of that year's profit in the calculation of goodwill. In this case, the given weights are as follows:

- 2012: 1
- 2013: 2
- 2014: 3
- 2015: 4

Step 2: Calculate the weighted average profit

Next, we need to calculate the weighted average profit by multiplying the profit of each year by its respective weight and then summing up the results. The formula to calculate the weighted average profit is:

Weighted Average Profit = (Profit1 * Weight1) + (Profit2 * Weight2) + (Profit3 * Weight3) + (Profit4 * Weight4)

Using the given profits and weights, we can calculate the weighted average profit as follows:

Weighted Average Profit = (2012 * 1) + (24800 * 2) + (20200 * 3) + (30000 * 4)
= 2012 + 49600 + 60600 + 120000
= 250212

Step 3: Calculate the average profit

To calculate the average profit, we need to divide the weighted average profit by the sum of the weights. The formula to calculate the average profit is:

Average Profit = Weighted Average Profit / Sum of Weights

In this case, the sum of the weights is 1 + 2 + 3 + 4 = 10. Therefore, the average profit can be calculated as:

Average Profit = 250212 / 10
= 25021.2

Step 4: Calculate the goodwill

Finally, we can calculate the goodwill by multiplying the average profit by the number of years of purchase. In this case, the number of years of purchase is 3. Therefore, the goodwill can be calculated as:

Goodwill = Average Profit * Number of Years of Purchase
= 25021.2 * 3
= 75063.6

Explanation:

To calculate the goodwill, we first assign weights to each year based on their importance. Then, we calculate the weighted average profit by multiplying the profit of each year by its respective weight and summing up the results. Next, we divide the weighted average profit by the sum of the weights to obtain the average profit. Finally, we multiply the average profit by the number of years of purchase to calculate the goodwill.

In this case, the calculated goodwill is 75063.6. This means that the firm has a goodwill value of 75063.6 based on the weighted average profits of the last four years. Goodwill represents the intangible value of a firm's reputation, customer base, and other factors that contribute to its profitability.

Similar Commerce Doubts

The profit of a firmfor the last 5 years amounted to 9000 12000-15000 13000 and 10000 respectively the value of goodwill is to be calculated at 3 years purchase of weighted average profit weight are to be assigned 5432 and 1 respectively find out the value of goodwill. solution?

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