Mahesh and auresh are partners and they admit Naresh into partnership. They agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits for the last five years. They assigned weights from 1 to 5 beginning from the earliest year adn onwards. The profits for the last five years were as follows:

Scrutiny of books of account revealed the following:
(i) A second-hand machine was purchased for Rs. 5,00,000 on 1st July, 2017 and Rs. 1,00,000 were spent to make it operational. Rs. 1,00,000 were wrongly debited to Repairs Account. Machinery is depreciated @ `20%` p.a. on Written Down Value Method.
(ii) Closing Stock as on 31st March, 2018 was undervalued by Rs. 50,000.
(iii) Remuneration to partners was to be considered as charge against profit and remuneration of Rs. 20,000 p.a. for each partner was considered appropriate.
Calculate the value of goodwill.

Answer

Goodwill - Rs. 3,75,000.