Read the following passage and answer the question.
A company made a profit of ₹1,00,000 after charging a Depreciation of ₹20,000 and a transfer to a General Reserve of ₹30,000. The goodwill written off of ₹7,000 and the gain on the sale of Machinery was ₹3,000.
The other information available (changes in the value of Current Assets and Current Liabilities) is as follows:
* At the end of the year Trade Receivables showed an increase of 6,000
* Trade Payables shows an increase of ₹10,000
* Prepaid Expenses show an increase of ₹200
* Outstanding Expenses show a Decrease of ₹2,000
Calculate the net profit before tax.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹1,30,000.
Profit made during the year = 1,00,000
Add: transfer to reserve = 30,000
Net profit before tax = 1,30,000