Nomal profit ( RS )

90,000

1,30,000

80,000

__________

3,00,000

54,000 is the goodwill.

GIVEN: Profit 2018-2019 = 23,000. Profit of 2019-2020= 40,000. Profit 2020-2021= 38,000

TO FIND: Goodwill

SOLUTION:

To find the average profit for the last three years, firstly we need to deduct the abnormal losses.

Profit of 2012-2019 after deducting abnormal loss= of 23,000 - 8,000

                                                                                 = 15,000

Profit of 2019-2020 after deducting abnormal loss= of 40,000 - 12,000

                                                                                   = 28,000

Profit of 2020-221 after deducting abnormal loss= of 38,000

Average Profit = [tex]\frac{Total profit of the years}{Number of years}[/tex]

                    = [tex]\frac{15000+28000+38000}{3}[/tex]

                    = 27,000

Goodwill = Average Profit × Number of purchase year

            = 27000 × 2

            = 54,000

• An intangible asset connected to the acquisition of a company by another is goodwill.

• Goodwill, which is typically taken into account during a business acquisition, is defined as the difference between a business's purchase price and its fair market value.
• Goodwill is a balance sheet intangible asset that can reflect a company's brand, reputation, clientele, and intellectual property.

54,000 is the goodwill.

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