Sumit purchased Amit’s business on 1st April, 2025. Goodwill was decided to be valued at two years purchase of average normal profit of last four years. The profits for the past four years were:
| Year Ended | 31st March, 2022 | 31st March, 2023 | 31st March, 2024 | 31st March, 2025 |
|---|---|---|---|---|
| Profits (₹) | 80,000 | 1,45,000 | 1,60,000 | 2,00,000 |
Books of Account revealed that:
(i) Abnormal loss of 20,000 was debited to Profit & Loss Account for the year ended 31st March, 2022.
(ii) A fixed asset was sold in the year ended 31st March, 2023 and gain (profit) of 25,000 was credited to Profit & Loss Account.
(iii) In the year ended 31st March, 2024 assets of the firm were not insured due to oversight. Insurance premium not paid was 15,000.
Calculate the value of goodwill.
Answer :