Question

The profits for 2019–20 are ₹ 2,000; for 2020–21 are ₹ 26,100 and for 2021-22 are ₹ 31,200. Closing Inventory for 2020–21 and 2021–22 includes the defective items of ₹ 2,200 and ₹ 6,200 respectively which were considered as having market value NIL. Calculate goodwill on simple average profit method.

विकल्प

• ₹ 23,700

• ₹ 17,700

• ₹ 13,700

• ₹ 17,300

Answer 1

₹ 17,700

Explanation:

Step 1: Given Profits

• 2019–20 = ₹ 2,000
• 2020–21 = ₹ 26,100
• 2021–22 = ₹ 31,200

The closing stock includes defective items valued at market value NIL, so the closing stock is overvalued.

• 2020–21: Overvalued by ₹ 2,200
• 2021–22: Overvalued by ₹ 6,200

Step 2: Adjust the Profits

2019–20

No adjustment.

Adjusted Profit = ₹ 2,000

2020–21

Profit is overstated due to overvalued closing stock.

Adjusted Profit = ₹ 26,100 − ₹ 2,200 = ₹ 23,900

2021–22

Opening stock is overstated by ₹ 2,200 (previous year's closing stock), which reduces current year's profit. Closing stock is overstated by ₹ 6,200, which increases current year's profit.

Net adjustment = + ₹ 2,200 − ₹ 6,200 = −₹ 4,000

Adjusted Profit = ₹ 31,200 − ₹ 4,000 = ₹ 27,200

Step 3: Calculate Average Profit

`(2,000 + 23,000 + 27,000)/3`

`(53,100)/3`

= ₹ 17,700