Answer :
To determine the value of goodwill based on the 3 years purchase of weighted average profit using the provided data, we'll follow these steps.
Step 1: Identify Profits and Weights
Years and Profits:
- 2007: Rs 60,000
- 2008: Rs 80,000
- 2009: Rs 100,000
- 2010: Rs 140,000
Weights Assigned:
- 2007: 1
- 2008: 2
- 2009: 3
- 2010: 4
Step 2: Calculate Weighted Profits
Multiply the profit of each year by its corresponding weight:
- Weighted Profit for 2007 = 60,000 \times 1 = 60,000
- Weighted Profit for 2008 = 80,000 \times 2 = 160,000
- Weighted Profit for 2009 = 100,000 \times 3 = 300,000
- Weighted Profit for 2010 = 140,000 \times 4 = 560,000
Step 3: Calculate Total Weighted Profit and Total Weights
Total Weighted Profit:
- Sum = 60,000 + 160,000 + 300,000 + 560,000 = 1,080,000
Total Weights:
- Sum = 1 + 2 + 3 + 4 = 10
Step 4: Calculate Weighted Average Profit
The weighted average profit is given by:
[tex]\text{Weighted Average Profit} = \frac{\text{Total Weighted Profit}}{\text{Total Weights}}[/tex]
[tex]\text{Weighted Average Profit} = \frac{1,080,000}{10} = 108,000[/tex]
Step 5: Calculate Goodwill
Goodwill is calculated as 3 years purchase of the weighted average profit:
[tex]\text{Goodwill} = \text{Weighted Average Profit} \times 3[/tex]
[tex]\text{Goodwill} = 108,000 \times 3 = 324,000[/tex]
Conclusion:
The value of goodwill, based on the 3 years' purchase of weighted average profit, is Rs 324,000.
