(i) Under this method, goodwill is calculated by multiplying the weighted average profit by a certain number of years of purchase.
(ii) Goodwill = Weighted average profit x Number of years of purchase
(iii) In this method, weights are assigned to each year's profit. Weighted profit is ascertained by multiplying the weights assigned with the respective year's profit.
(iv) The sum of the weighted profits is divided by the sum of weights assigned to determine the weighted average profit
Weighted average profit
\(=\frac{Total\ of\ weighted\ profits}{Total\ of\ weights}\)

Goodwill may be classified into acquired goodwill or self-generated goodwill.
(i) Acquired or purchased goodwill:
(1) Goodwill acquired by making payment in cash or kind is called acquired or purchased goodwill.
(2) The excess of purchase consideration over the value of net assets acquired is treated as acquired goodwill.
(ii) Self - generated goodwill:
It is the goodwill which is self generated by a firm based on features of the business such as favourable location, local customers, etc. Such self-generated goodwill cannot be recorded in the books of accounts.

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{20,000+17,000+23,000}{3}\)
\(=\frac{60,000}{3}\) = Rs.20,000
Normal profit = Capital employed x Normal rate of return
80,000 \(\times\) 15% = Rs. 12,000
Super profit = Average profit - Normal profit
20,000 - 12,000 = Rs. 8,000
Goodwill = Super profit \(\times\) Number of years of purchase
= 8,000 \(\times\) 2 = Rs.16,000
Goodwill = Rs. 16,000

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{10,000+12,000+12,000+11,500}{4}\)
\(=\frac{46,000}{4}\) = Rs.11,500

Goodwill Average profit \(\times\) Number of years of purchase
= 10,000 \(\times\) 3
= Rs. 30,000
Goodwill = Rs. 30,000

 Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
Average profit = \(\frac { 27,000+31,000+32,000 }{ 3 } \)
= \(\frac { 90,000 }{ 3 } \) = Rs. 30,000

Goodwill = Average profit \(\times\) Number of years of purchase
= 24,400 \(\times\) 2
= Rs. 48,800

If the firm enjoys good reputations for its product's quality, there will be higher sales and the value of its goodwill will increase.

Goodwill cannot be seen and touched. It is invisible. Hence it is treated as intangible asset. But it is not a fictitious asset because goodwill has a value and it can be purchased or sold with any other asset.

Normal rate of return refers to the rate at which profit is earned by similar business entities in the industry under normal circumstances.

Goodwill = Average profit \(\times\) Number of years of purchase
Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(\frac{10,000+11,000+12,000+13,000+14,000}{5}\)
\(=\frac{60,000}{5}\) = Rs. 12,000
Average profit = Rs. 12,000
Goodwill Average profit \(\times\) Number of years of purchase
12,000 \(\times\) 2 = 24,000
Goodwill = Rs. 24,000

Total capitalised value of the average profit = \(\frac { Average\ profit }{ Normal\ rate\ of\ return } \)\(\times\) 100
=\(\frac { 60,000 }{ 10 } \) \(\times\) 100
= Rs. 6,00,000
Goodwill = Total capitalised value of the average profit – Capital employed
= 6,00,000 – 4,50,000
= Rs. 1,50,000

Weighted average profit = \(\frac { Total\ of\ weighted\ profits }{ Total\ of\ weights } \)
=\(\frac { 2,48,000 }{ 10 } \)=Rs.24,800
Goodwill = Weighted average profit × Number of years of purchase
= 24,800 x 3 = Rs.74,400

Average profit \(=\frac{Total\ profit}{Number\ of\ profits}\)
\(=\frac{16,000+18,000+20,000}{3}\)
\(=\frac{54,000}{4}=Rs. 18,000\)
Normal profit = Capital employed x Normal rate of return
= 1,00,000 x 15%
= Rs.15,000
Super profit = Average profit - Normal profit
= 18,000 - 15,000
= Rs.3,000
Goodwill = Super profit x Value of annuity
= 3,000 x 2.4868
= Rs.7,460.40

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{20,500+17,000+30,000}{3}\)
\(\frac{67,500}{3}\)
Average profit =Rs. 22,500
Goodwill =Average profitxNumber of years of purchase
=22,500x2=2=45,000
[Note: Over valuation of closing stock in 2017 will result in over valuation of opening stock in 2018]

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{20,000+25,000+24,000+23,000}{4}\)
\(\frac{92,000}{4}\)
Average profit =Rs.23,000
Average profit before adjusting fair remuneration of the partner = Rs.23,000
Less:
Fair remuneration of partners  =3,000
                                                         _____
Average profit                              =20,000
                                                         _____
Goodwill = Average profit x Number of years of purchase
=20,000x3= Rs. 60,000