Question

A, B and C were partners sharing profits in the ratio of 2 : 2 : 1, decided to share future profits in 1 : 2 : 3. On this date firm had assets of ₹ 3,80,000 including cash of ₹ 20,000. The partners' capital accounts showed a balance of ₹ 3,00,000 and reserves constituted the rest. Normal rate of return is 10% and goodwill of the firm is valued at ₹ 75,000 at 3 years' purchase of super profits.

On the basis of the above information, answer the following:

Normal Profit of the firm is:

Options

• ₹ 30,000

• ₹ 38,000

• ₹ 36,000

• ₹ 40,000

Answer 1

₹ 38,000

Explanation:

Capital Employed = Assets = ₹ 3,80,000

Normal Profit = Capital Employed × `"Normal Rate of Return"/100`

= `₹ 3,80,000 xx 10/100`

= ₹ 38,000