Current Affairs Exam > Current Affairs Questions > Kiran purchases the business of Sandip on 1st...
Start Learning for Free
Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years?
Most Upvoted Answer
Kiran purchases the business of Sandip on 1st January, 2020. The profi...
Calculation of Goodwill Value based on Average Profit of Last 4 years
To calculate the value of goodwill of the firm, we need to follow the below steps:
Step 1: Calculate the total profits earned by Sandip during the last 3 years, i.e., 2017, 2018, and 2019.
Total Profits earned by Sandip = 66,000 + 72,000 + 62,000 = 2,00,000
Step 2: Adjust the profits earned by Sandip for any abnormal gains or losses during the last 3 years.
Abnormal Gains/Losses = 6,000 (sale of machinery) + 5,000 (theft of goods) + 4,000 (insurance premium)
Adjusted Profits = Total Profits - Abnormal Gains/Losses = 2,00,000 - 15,000 = 1,85,000
Step 3: Calculate the average profit of the last 4 years.
Average Profit of Last 4 years = (Adjusted Profits + Kiran's Profit)/4
Kiran's Profit is not given in the question. Let's assume Kiran's Profit to be X.
Average Profit of Last 4 years = (1,85,000 + X)/4
Step 4: Calculate the value of Goodwill of the firm.
Value of Goodwill = 3 Years Purchase of Average Profit of Last 4 years
= 3 * Average Profit of Last 4 years
= 3 * (1,85,000 + X)/4
= (5,55,000 + 3X)/4
Explanation
Goodwill is an intangible asset that represents the value of a business entity beyond its tangible assets. It is an important factor in the valuation of a business. The value of goodwill is generally calculated based on the average profit of the last few years. In this question, we have been given the profits earned by Sandip during the last 3 years, and we need to calculate the value of goodwill of the firm based on the average profit of the last 4 years.
To calculate the value of goodwill, we first need to adjust the profits earned by Sandip for any abnormal gains or losses during the last 3 years. This is necessary because abnormal gains or losses are not likely to occur in the future, and therefore, they should not be included in the calculation of goodwill.
Next, we need to calculate the average profit of the last 4 years, which includes Kiran's profit as well. Kiran's profit is not given in the question, so we need to assume it. Finally, we can calculate the value of goodwill by applying the formula of 3 years purchase of average profit of last 4 years.
Overall, the calculation of goodwill value based on the average profit of the last few years is an important tool for business valuation and helps in making informed decisions about the purchase or sale of a business.
To calculate the value of goodwill of the firm, we need to follow the below steps:
Step 1: Calculate the total profits earned by Sandip during the last 3 years, i.e., 2017, 2018, and 2019.
Total Profits earned by Sandip = 66,000 + 72,000 + 62,000 = 2,00,000
Step 2: Adjust the profits earned by Sandip for any abnormal gains or losses during the last 3 years.
Abnormal Gains/Losses = 6,000 (sale of machinery) + 5,000 (theft of goods) + 4,000 (insurance premium)
Adjusted Profits = Total Profits - Abnormal Gains/Losses = 2,00,000 - 15,000 = 1,85,000
Step 3: Calculate the average profit of the last 4 years.
Average Profit of Last 4 years = (Adjusted Profits + Kiran's Profit)/4
Kiran's Profit is not given in the question. Let's assume Kiran's Profit to be X.
Average Profit of Last 4 years = (1,85,000 + X)/4
Step 4: Calculate the value of Goodwill of the firm.
Value of Goodwill = 3 Years Purchase of Average Profit of Last 4 years
= 3 * Average Profit of Last 4 years
= 3 * (1,85,000 + X)/4
= (5,55,000 + 3X)/4
Explanation
Goodwill is an intangible asset that represents the value of a business entity beyond its tangible assets. It is an important factor in the valuation of a business. The value of goodwill is generally calculated based on the average profit of the last few years. In this question, we have been given the profits earned by Sandip during the last 3 years, and we need to calculate the value of goodwill of the firm based on the average profit of the last 4 years.
To calculate the value of goodwill, we first need to adjust the profits earned by Sandip for any abnormal gains or losses during the last 3 years. This is necessary because abnormal gains or losses are not likely to occur in the future, and therefore, they should not be included in the calculation of goodwill.
Next, we need to calculate the average profit of the last 4 years, which includes Kiran's profit as well. Kiran's profit is not given in the question, so we need to assume it. Finally, we can calculate the value of goodwill by applying the formula of 3 years purchase of average profit of last 4 years.
Overall, the calculation of goodwill value based on the average profit of the last few years is an important tool for business valuation and helps in making informed decisions about the purchase or sale of a business.
Community Answer
Kiran purchases the business of Sandip on 1st January, 2020. The profi...
How to solve
Attention Current Affairs Students!
To make sure you are not studying endlessly, EduRev has designed Current Affairs study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Current Affairs.
|
Explore Courses for Current Affairs exam
|
|
Top Courses for Current AffairsView all
Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years?
Question Description
Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? for Current Affairs 2024 is part of Current Affairs preparation. The Question and answers have been prepared according to the Current Affairs exam syllabus. Information about Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? covers all topics & solutions for Current Affairs 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years?.
Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? for Current Affairs 2024 is part of Current Affairs preparation. The Question and answers have been prepared according to the Current Affairs exam syllabus. Information about Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? covers all topics & solutions for Current Affairs 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years?.
Solutions for Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? in English & in Hindi are available as part of our courses for Current Affairs.
Download more important topics, notes, lectures and mock test series for Current Affairs Exam by signing up for free.
Here you can find the meaning of Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? defined & explained in the simplest way possible. Besides giving the explanation of
Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years?, a detailed solution for Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? has been provided alongside types of Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? theory, EduRev gives you an
ample number of questions to practice Kiran purchases the business of Sandip on 1st January, 2020. The profits of past 3 years earned by Sandip are as under: 2017: * 66,000 (including 6,000 from sale of machinery). 2018: 72,000 (including theft of goods worth 5,000 during the year). 2019: 62,000 (does not include 4,000 as insurance premium). Compute the Value of Goodwill of the firm based on 3 years purchase of the average profit of last 4 years? tests, examples and also practice Current Affairs tests.
|
|
Explore Courses for Current Affairs exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup