Mahesh and Suresh 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 having assigned weights from 1 to 5 beginning from the earliest year and onwards. The profits for the last 5 years were as follows:
Year Ended 31st March 2013 31st March 2014 31st March 2015 31st March 2016 31st March 2017
Profit (Rs.) 1,25,000 1,40,000 1,20,000 55,000 2,57,000 Scrutiny of books of accounts revealed the following:
i) A second hand machine was purchased for Rs. 5,00,000 on 1st July 2015 and Rs. 1,00,000 were spent to make it operational. Rs. 1,00,000 were wrongly debited to Repairs Account. Machinery was depreciated @ 20% p.a. on Written Down Value Method.
ii) Closing Stock as on 31st March 2016 was undervalued by Rs. 50,000.
iii) Remuneration to partners was to be considered as a charge against profit and remuneration was Rs. 30,000 p.a. for each partner was considered as _ date.
Calculate the value of goodwill.