| 2016-17 | ₹ 1,00,000 (including an abnormal gain of ₹ 12,500). |
| 2017-18 | ₹ 1,25,000 (after charging an abnormal loss of ₹ 25,000). |
| 2018-19 | ₹ 1,12,500 (excluding ₹ 12,500 as insurance premium on firm’s property- now to be insured). |
Calculate the value of firm's goodwill on the basis of two year's purchase of the average profit of the last three years.
Adjusted Profits are as follows:
2016-17 = 100000 - 12500 (abnormal gain included is now removed)= 87,500
2017-18 = 125000 + 25000 (abnormal loss charged now added) = 1,50,000
2018-19 = 112500 - 12500 (insurance premium being an expense will now be reduced from the profits) = 1,00,000
Average Profits = `[("Normal Profits for 2016-17")+("Normal Profits for 2017-18")+("Normal Profits for 2017-18")]/3`
= `[("87,500")+("1,50,000")+("1,00,000")]/3`
= 1,12,500
Goodwill = Average Profits of last years `\times` No. of years Purchase
Goodwill = 1,12,500 `\times` 2
= Rs. 2,25,000.