Bharat and Bhushan are partners sharing profits in the ration of `3:2` . They decided to amit Manu as a partner from 1st April, 2019 on the following terms:
(i) Manu will be given 2/5th share of the profit.
(ii) Goodwill of the firm will be valued at two years' purchase of three years' normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
2019 - Profit Rs. 30,000 (after debiting loss of stock by fire Rs. 40,000).
2018 - Loss Rs. 80,000 (Includes voluntary retirement compensation paid Rs. 1,10,000).
2017 - Profit Rs. 1,10,000 (Including a gain (profit) of Rs. 30,000 on the sale of fixed assets).
Calculate the value of goodwill .

Answer

Goodwill - Rs. 1,20,000.