Goodwill of a firm is to be valued at two years' purchase of three years' average profits. The profits of the last three years were: 2015—OMR 30,000, 2016—OMR 40,000 & 2017—OMR 35,000. Calculate the amount of goodwill.

Goodwill of a firm is to be valued at two years' purchase of three years' average profits. The profits of the last three years were: 2015—OMR 30,000, 2016—OMR 40,000 & 2017—OMR 35,000. Calculate the amount of goodwill.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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