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The firm A,B,andC has existed for the last 5 year partners decide to raise goodwill account in the books at twice the average of last 5 year's profit .The profit of last 5 year are as under . Years Rupes. Years Rupes. 1. 20000 4 5000 2. 15000 5 10000 3. 5000?
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The firm A,B,andC has existed for the last 5 year partners decide to r...
Calculation of Goodwill for A, B, and C Firm


Background Information

The firm A, B, and C has been in existence for the last 5 years. The partners have decided to raise the goodwill account in the books at twice the average of the last 5 years' profit. The profits of the last 5 years are as follows:































Year Profit (Rupees)
1 20,000
2 15,000
3 5,000
4 5,000
5 10,000


Calculation of Goodwill

To calculate the goodwill for A, B, and C firm, we need to follow the steps below:



  • Step 1: Find the average profit for the last 5 years


    • Average profit = (20,000 + 15,000 + 5,000 + 5,000 + 10,000) / 5

    • Average profit = 11,000


  • Step 2: Double the average profit


    • Goodwill = 2 x 11,000

    • Goodwill = 22,000


  • Step 3: Record the goodwill in the books of accounts


    • The partners should record the goodwill of 22,000 in the books of accounts for A, B, and C firm.




Conclusion

The goodwill for A, B, and C firm is 22,000 based on the calculation above. The partners can now record this amount in the books of accounts to reflect the increase in the value of the firm.
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The firm A,B,andC has existed for the last 5 year partners decide to raise goodwill account in the books at twice the average of last 5 year's profit .The profit of last 5 year are as under . Years Rupes. Years Rupes. 1. 20000 4 5000 2. 15000 5 10000 3. 5000?
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