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The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.
  • a)
    Rs. 85,000
  • b)
    Rs. 2,55,000
  • c)
    Rs. 2,75,000
  • d)
    Rs. 2,85,000
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000;...
Calculation of Average Profit
To find the goodwill based on average profits, we first need to calculate the average profit over the last five years.
  • Profits for the last five years:
    • Year 1: Rs. 85,000
    • Year 2: Rs. 90,000
    • Year 3: Rs. 70,000
    • Year 4: Rs. 1,00,000
    • Year 5: Rs. 80,000

  • Total Profit = 85,000 + 90,000 + 70,000 + 1,00,000 + 80,000 = Rs. 4,25,000
  • Average Profit = Total Profit / Number of Years = Rs. 4,25,000 / 5 = Rs. 85,000

Calculation of Goodwill
Goodwill is calculated based on the average profit and the number of years of purchase, which in this case is 3 years.
  • Goodwill = Average Profit x Number of Years of Purchase
  • Goodwill = Rs. 85,000 x 3 = Rs. 2,55,000

Conclusion
Therefore, the value of goodwill, when calculated on the average profits of the last five years on the basis of 3 years of purchase, is:
  • Correct Answer: Rs. 2,55,000 (Option B)
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The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.a)Rs. 85,000b)Rs. 2,55,000c)Rs. 2,75,000d)Rs. 2,85,000Correct answer is option 'B'. Can you explain this answer?
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The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.a)Rs. 85,000b)Rs. 2,55,000c)Rs. 2,75,000d)Rs. 2,85,000Correct answer is option 'B'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.a)Rs. 85,000b)Rs. 2,55,000c)Rs. 2,75,000d)Rs. 2,85,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.a)Rs. 85,000b)Rs. 2,55,000c)Rs. 2,75,000d)Rs. 2,85,000Correct answer is option 'B'. Can you explain this answer?.
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