QUESTION 2 Shatta Whales has been in trading on her own account for many years. She decides to admit Shatta Bindles as a partner. For the purpose of ascertaining the amount which Shatta Bindles should pay for her share of goodwill, it was agreed that the total goodwill should be valued at three year's purchase of the simple average profits of the past five years. The profits had been as follows: Year Profit (GHS) 2014 2,819 2015 2,164 2016 3,310 2017 3,197 2018 2,985 Required: With reference to the above information; (a) Outline the steps in determining goodwill based on the 'Purchase of number of years' average net profit method', with specific emphasis on the simple average method (b) Ascertain the goodwill payable by Shatta Bindles based on the steps outlined in (a) above (c) Outline three (3) factors that contribute to goodwill.

QUESTION 2 Shatta Whales has been in trading on her own account for many years. She decides to admit Shatta Bindles as a partner. For the purpose of ascertaining the amount which Shatta Bindles should pay for her share of goodwill, it was agreed that the total goodwill should be valued at three year's purchase of the simple average profits of the past five years. The profits had been as follows: Year Profit (GHS) 2014 2,819 2015 2,164 2016 3,310 2017 3,197 2018 2,985 Required: With reference to the above information; (a) Outline the steps in determining goodwill based on the 'Purchase of number of years' average net profit method', with specific emphasis on the simple average method (b) Ascertain the goodwill payable by Shatta Bindles based on the steps outlined in (a) above (c) Outline three (3) factors that contribute to goodwill.

Accounting (Text Only)

26th Edition

ISBN:9781285743615

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 12.4BPR

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