Mahesh and suresh are partners and they admit naresh


Asked by admin @ in Accountancy viewed by 648 People


49. Mahesh and Suresh are partners and they admit Naresh into partnership. They agreed to value goodwill

at three years' purchase on Weighted Average Profit Method taking profits for the last five years. Theyassigned weights from 1 to 5 beginning from the earliest year and onwards. The profits for the last fiveyears were as follows:Year Ended| 31st March, 201531st March, 201631st March, 2017 | 31st March, 201831st March, 2019Profits ()1,25,0001,40,0001,20,00055,0002,57,000Scrutiny of books of account revealed the following:0 A second-hand machine was purchased for 5,00,000 on 1st July, 2017 and 1,00,000 were spent tomake it operational. * 1,00,000 were wrongly debited to Repairs Account. Machinery is depreciated@ 20% p.a. on Written Down Value Method.6) Closing Stock as on 31st March, 2018 was undervalued by 50,000.O Remuneration to partners was to be considered as charge against profit and remuneration of20,000 p.a. for each partner was considered appropriate.Calculate the value of goodwill.[Ans.: Goodwill - 3,75,000.]​

Answered by admin @



Goodwill = Rs. 3,15,000

Explanation:

Please find attached the picture for the working notes.

Weighted averaged profit = Total of profit product / total of weights

= 24,75,000 / 15

= Rs. 1,65,000

Weighted average profit adjusted = 1,65,000 - 60,000 = 1,05,000

60K is the remuneration to partners.

Goodwill = Weighted average profit adjusted * Number of years' purchased

 = 1,05,000 * 3  

 = Rs. 3,15,000


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