Question : M/s Hi-Tech India has assets of Rs. 5,00,000 whereas liabilities are: Partner; Capitals—Rs. 3,50,000, General Reserve—Rs. 60,000 and Sundry Creditors—Rs. 90,000. If the normal rate of return is 10% and the goodwill of the firm is valued at Rs. 90,000 at 2 years; purchase of super profit, the average profit of the firm will be
Option 1: Rs.4,000
Option 2: Rs.41,000
Option 3: Rs.86,000
Option 4: None of these
Correct Answer: Rs.86,000
Solution : Answer = 86000
Goodwill = Super Profit × Number of Years' Purchase
Rs. 90,000 = Super Profit × 2
Super Profit = = Rs. 45,000
Capital Employed = Assets - Outside Liabilities (Creditors)
= Rs. 5,00,000 - Rs. 90,000 = Rs. 4,10,000
Or
= Partners Capitals + General Reserve
= Rs. 3,50,000 + Rs. 60,000 = Rs. 4,10,000
Normal Rate of Return = : 10%
Normal Profit = Rs. 4,10,000 x = Rs. 41,000
Super Profit = Average Profit - Normal Profit Average Profit = Super Profit + Normal Profit
= Rs. 45,000 + Rs. 41,000 = Rs. 86,000 Hence, the correct option is 3.
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