Asin and Shreyas were partners sharing profits and losses in the ratio of 2 : 1. They admitted Shyam as a partner for 1/5th share in profits. For this purpose, the Goodwill of the firm was to be valued on the basis of three years’ purchase of the last five years’ average profit. Profits for the last five years ended 31st March were:
| Year | Profit (₹) |
| 2020 | 1,25,000 |
| 2021 | 1,00,000 |
| 2022 | 1,87,500 |
| 2023 | (62,500) |
| 2024 | 1,25,000 |
Calculate the Goodwill of the firm after adjusting the following:
Profit of 2020-21 was calculated after charging ₹ 25,000 for abnormal loss of goods by fire.
[Ans.: Goodwill – ₹ 3,00,000]
Solution:-
