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How is goodwill usually calculated under the average profit method?

Answer and explanation

Correct answer: Average profit multiplied by the number of years' purchase

Under the average profit method, goodwill is calculated as average profit multiplied by the agreed number of years' purchase. For example, if average profit is ₹P and the years' purchase is n, goodwill = ₹P × n.

Related tags

Average Profit MethodGoodwill ValuationAccounting FormulaGoodwill SettlementReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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