Goodwill Valuation 2 - Accountancy

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Given a balance sheet as at 31 Dec 2007. The new partner was admitted on 1 Jan 2007.

Goodwill was agreed at 2 years purchase and was to be valued in accordance to the weighted average gross profit method for the previous four years starting from last year.

Gross Profits:
Year 2003 - 3,000,000 Weight - 1
Year 2004 - 1,800,000 Weight - 2
Year 2005 - 5,200,000 Weight - 3
Year 2006 - 6,300,000 Weight - 3
Year 2007 - 6,000,000 Weight - 2

Expenses:
2003 - 500,000
2004 - 800,000
2005 - 700,000
2006 - 800,000
2007 - 1,000,000

Req- Ascertain the amount of goodwill.

Note: Take care of admission date, balance sheet date and expenses...

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