Calculate the goodwill of a firm on the basis of three years 39 purchase of the weighted average pro...........

Calculate the goodwill of a firm on the basis of three years' purchase of the weighted average profit of the last four years. The appropriate weights to be used and profits are:

Year	2015-16	2016-17	2017-18	2018-19
Profits (Rs)	1,01,000	1,24,000	1,00,000	1,40,000
Weights	1	2	3	4

On a scrutiny of the accounts, the following matters are revealed:

(i) On 1st December, 2017, a major repair was made in respect of the plant incurring Rs 30,000 which was charged to revenue. The said sum is agreed to be capitalised for goodwill calculation subject to adjustment of depreciation of 10% p.a. on Reducing Balance Method.

(ii) The closing stock for the year 2016-17 was overvalued by Rs 12,000.

(iii) To cover management cost, an annual charge of Rs24,000 should be made for the purpose of goodwill valuation.

(iv) On 1st April, 2016, a machine having a book value of Rs 10,000 was sold for Rs 11,000 but the proceeds were wrongly credited to Profit and Loss Account. No effect has been given to rectify the same. Depreciation is charged on machine @ 10% p.a. on reducing balance method. (3 marks)

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