Purav and Purvi are partners in a firm sharing profits and losses in the ratio of 2 : 1. They admit Parv into a partnership for 1/4th share on 1st April 2023. For this purpose, goodwill is to be valued at four times the average annual profit of the previous four or five years, whichever is higher. The agreed profits for goodwill purposes of the past five years ended 31st March are:
| Year | Profit (₹) |
| 2022 | 14,000 |
| 2023 | 15,500 |
| 2024 | 10,000 |
| 2025 | 16,000 |
| 2026 | 15,000 |
Calculate the value of goodwill.
[Ans: Goodwill – ₹ 56,500.]
Solution:-
