A,B,C D are partners sharing profit in the ratio 2:4:3:1. c retires and for this purpose goodwill is valued at two year purchase of average super profits of last four years ,which were as under
1 year 40000
2 year 10000(loss)
3 year 100000
4 year 150000
the normal profit of the similar firm is rs56000.
pass necessary journal entry for goodwill on retirement of c.
Dear Student,
First, Calculate average profit =
Secondly, difference of average profit and normal profit is Super Profit.
Super Profit = Average Profit - Normal Profit = 70,000 - 56,000=14,000
Goodwill is valued at 2 years purchase of super profits
Therefore, Goodwill = 14,0002= 28,000
Hope this answers your query.
Keep posting for further doubts!!
First, Calculate average profit =
Secondly, difference of average profit and normal profit is Super Profit.
Super Profit = Average Profit - Normal Profit = 70,000 - 56,000=14,000
Goodwill is valued at 2 years purchase of super profits
Therefore, Goodwill = 14,0002= 28,000
Hope this answers your query.
Keep posting for further doubts!!