Question # 18
Capital employed at the
beginning of the year is Rs
5,20,000 and the profit earned
during the year is Rs 60,000.
Average capital employed during
the year is
Your choices are
A) Rs 5,50,000
B) Rs 5,20,000
C) Rs 5,80,000
D) Rs 4,60,000
Answers
Step-by-step explanation:
Correct option is
A
Rs 20,000
Calculation of Goodwill by Super profit method
Goodwill = Super profit * No. purchase years
= 10000 * 2
= 20000
Super profit = Average profit - Normal Profit
= 60000 - 50000
= 10000
Normal Profit = Capital employed * Rate / 100
= 400000 * 12.5 / 100
= 50000
Given; Capital employed at the beginning of the year is Rs 5,20,000 and the profit earned during the year is Rs 60,000.
To find; Average capital employed during the year
Solution; It is given that Capital employed at the beginning of the year is Rs 5,20,000 and the profit earned during the year is Rs 60,000.
Capital employed at the beginner of the year = Rs 520000
Profit earned during the year = Rs 60000
Total income during the year = 580000
Hence the correct option is C