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Question 15 Chapter 3 - Unimax Class 12 Part 1
15. On 1st April, 2021 an existing firm has assets of Rs. 80000 including cash of Rs. 5000. The Partner’s Capital accounts showed a balance of Rs. 60000 and reserves constituted the rest. If the normal rate of return is 20% and the goodwill of the firm is valued at Rs. 24000 at 4 years purchase of super profits, find the average profits of the firm.
Goodwill = Rs. 24000 (given)
Or Goodwill = Super Profits X No. of years of purchase of super profits
Rs. 24000 = Super Profits X 4
Super Profits =Rs. 24000/4= Rs. 6000
Capital employed = Net Assets = Rs. 80000
Normal Profits = Capital employed X Normal rate of return
= Rs. 80000 X 20/100
= Rs. 16000
Super Profits = Average Profits – Normal Profits
Rs.6000 = Average Profits – Rs. 16000
So, Average Profits = Rs. 22000
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Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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