Question

Identify the formula for calculating goodwill with the help of the Average Profit Method.

Options

• Goodwill = Average Profit × No. of Years Purchases

• Goodwill = Total Profit × No. of Years Purchases

• Goodwill = Total Profit × No. of years the firm has been in operation

• Goodwill = Average Profit × 5 years

Answer 1

Goodwill = Average Profit × No. of Years Purchases