Question

Weighted average method of calculating goodwill is used when ______.

Options

• Profits are not equal.

• Profits show a trend.

• Profits are fluctuating.

• None of the above.

Answer 1

Weighted average method of calculating goodwill is used when profits show a trend.

Explanation:

The weighted average method of calculating goodwill is used when the profits show a trend, meaning they are either increasing or decreasing over the years. This method assigns more weight to recent profits, giving a more accurate reflection of future maintainable profits.