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Question
A and B are partners with capitals of ₹ 3,00,000 and ₹ 2,00,000 respectively. Normal rate of return is 15% and goodwill calculated at 2 years purchase of super profits is valued at ₹ 1,00,000. What were the average profits of the firm?
Options
₹ 1,25,000
₹ 25,000
₹ 1,75,000
₹ 60,000
MCQ
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Solution
₹ 1,25,000
Explanation:
Normal Profit = 15% of ₹ 5,00,000 = ₹ 75,000
Super Profit = `(1,00,000)/2` = ₹ 50,000
Average Profit = Normal Profit + Super Profit
= 75,000 + 50,000
= ₹ 1,25,000
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