Question :
On 1st April, 2014, a firm had assets of Rs. 1,00,000 excluding stock of Rs. 20,000. Partners’ Capital Accounts showed a balance of Rs. 60,000. The current liabilities were Rs. 10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the ‘Goodwill’ of the firm is valued at Rs.60,000 at four years purchases of super profit, the average profit of the firm will be
Option 1: Rs 23,800
Option 2: Rs 50,000
Option 3: Rs 43,000
Option 4: None of the above
Correct Answer: Rs 23,800
Solution :
Answer = Rs 23,800
60,000/4 = super profit
Super profit = 15,000
Capital employed = total assets – outsider liabilities
1,20,000 - 10,000 = 1,10,000
Normal profit = 1,10,000 X 8/100 = 8,800
Super profit = average profit – normal profit
15,000= average profit - 8,800
Average profit = 23,800
Hence, the correct option is 1.
