Q4. X purchased the business of y from 1st April 2019. For this purpose goodwill is to be valued at 100% of the average annual profits of the last four years.
The profits shown by Y's business for the last four years were:
Year ended
₹
31st March, 2016 Profit 1,00,000 (after debiting loss of stock by fire ₹50,000)
" 2017 Loss 1,50,000 (includes voluntary retirement compensation paid ₹80,000)
" 2018 Profit 1,50,000
" 2019 Profit 2,50,000
Verification of books of accounts revealed the following:
(1) During the year ended 31st March, 2017, a machine got destroyed in accident and ₹60,000 was written off as loss in Profit & Loss Account.
(ii) On 1st July 2017, Two Computers costing ₹40,000 each were purchased and were debited to Travelling Expenses Account on which depreciation is to be charged @ 10% p.a. on Straight Line Method.
Calculate the value of goodwill.
