Read the following information to answer.
On the basis of case study given below, answer the question which follows:
"Mikku on alumni of IIT Delhi initiated his start-up "Gajanan Lid.," in the year 2016. His profit in the year 2020-21 after all appropriation was ₹6,25,000. This profit was arrived after taking the following items into consideration:
| Loss on Sale of fixed Assets | ₹5,00,000 |
| Goodwill written off | ₹3,80,000 |
| Transfer to reserve | ₹3,55,000 |
| Provision for tax | ₹2,70,000 |
| Interest on Debentures paid | ₹1,65,000 |
| Particulars | 2020(₹) | 2021(₹) |
| Prepaid Expenses | 25,000 | 10,000 |
| Accrued interest | 40,000 | 68,000 |
| Trade payables | 7,00,000 | 4,00,000 |
| Inventories | 6,50,000 | 5,50,000 |
Operating Profit before working capital changes will be:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹22,95,000.
Profit after all appropriations = 6,25,000
Add: transfer to reserve = 3,55,000
provision for tax = 2,70,000
Profit before tax 12,50,000
Add: Amortisation 3,80,000
loss on Sale 5,00,000
Int . paid 1,65,000 ₹10,45,000
Operating Profit before Working Capital = (12,50,000 + 10,45,000)
= 22, 95,000