- 1 Marks
FA – May 2012 – L1 – SA – Q6 – Partnership Accounts
Calculating the value of goodwill in a partnership.
Question
The profits of ABC Partnership firm for 5 years ended 31 December 2011 were as follows:
Year Profits
2007 N15,000,000
2008 N9,000,000
2009 N4,500,000
2010 N7,500,000
2011 N10,500,000
The firm intends to admit a new partner on 1 January 2012. What is the value of goodwill where the partners have decided to value goodwill at 4 years’ purchase of the average super profit over the last 5 years based on normal profits of N3,000,000 per annum?
A. N6,300,000
B. N9,300,000
C. N25,200,000
D. N25,300,000
E. N25,350,000.
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