The profits earned by a business over the last 5 years are as follows: ₹ 20,000; ₹ 30,000; ₹ 10,000; ₹ 50,000 and ₹ 2,000 (loss). Based on 2 years of purchases of the last 4 years’ average profits, the value of goodwill will be:

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₹ 44,000 Explanation: Average Profit = `(30,000 + 10,000 + 50,000 - 2,000)/4 = (88,000)/4` = ₹ 22,000 Goodwill = 2 years’ purchase of average profits = 22,000 $\times$ 2 = ₹ 44,000

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