Question

Anil and Sunil are partners in a firm. On 1^st April 2024, their capital balances show as ₹ 3,00,000 and ₹ 2,00,000 respectively. On the same date, firm’s goodwill valued by Capitalisation of average profit method is determined at ₹ 3,50,000. Capitalised value of average profits and average profits are ₹ 8,50,000 and ₹ 1,70,000 respectively. What will be the normal commercial yield on capital invested in such business?

Options

• 30%

• 10%

• 20%

• 15%

Answer 1

20%

Explanation:

Given:

Capitalised value of average profits = ₹ 8,50,000

Average profits = ₹ 1,70,000

Normal Commercial Yield = `("Average Profits"/"Capitalised value of average profits") xx 100`

Normal Commercial Yield = `((1,70,000)/(8,50,000)) xx 100`

= 20%