The profits of a firm for the last five years are Rs. 80,000, Rs. 90,000, Rs. 70,000, Rs. 85,000 and Rs. 1,00,000 respectively. The goodwill of the firm is calculated on basis of three year purchase of average profits of five years. The value of goodwill is
A. Rs. 89,000
B. Rs. 2,25,000
C. Rs. 2,55,000
D. Rs. 4,25,000
Answer: Option C
This Question Belongs to Commerce >> Accounting
TAKE AVERAGE OF ALL GIVEN DATA:
80,000 + 90,000 + 70,000 + 85,000 + 100,000 DIVIDEND BY THE SUM OF ALL VALUES IS 5
425,000 / 5 = 85,000
FOR THREE YEARS = 85,000 * 3 = 2,55,000
SO, THE ANSWER C IS RIGHT.