Question

12. A firm had assets ? 1,00,000 including cash 10,000. The partners
capital was 70,000 and rest of the balance constituted the reserves
normal rate of return is 10% and goodwill of the form is valued
27.000 at three years purchase of super profit, find the average proti
Hint. Capital of firm is 100000 ​

Answer 1

MARK ME BRAINLIST

Step 1: Calculation of Capital Employed:

Capital Employed= Total assets- Creditors

= 75000-5000

= 70000

Step 2: Calculation of Normal Profit:

Normal Profit= Capital Employed* [Normal Rate Of Return/100]

= 70000* [20/100]

= 14000

Step 3: Calculation of Super Profit from Goodwill:

Super Profit= Goodwill/ Number of year's of purchase

= 24000/4

= 6000

Step 4: Calculation of Average Profit from Super Profit:

Average Profit= Super Profit+ Normal Profit

= 14000+6000

= 20000