Calculate the amount of adjusted profit for the year ended 31 March 2021 for the purpose of valuation of Goodwill from the following information:
Profit for the year ended 31 March 2021: ₹80,000
On 1 July, 2020, a major plant repair was undertaken for 10,000 which was charged to Revenue. The said sum is to be capitalized for Goodwill valuation subject to adjustment of depreciation @ 10% p.a. on reducing balance method.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹89,250.
Profit = 80,000
Add: repairs which wrongly charged = 10,000
Less : Depreciation (10,000 X 10/100 X 9/12) = 750
Adjusted profit = 80,000 + 10,000 -750
= 89,250