Read the following information and answer the question.

Kavita is the C.E.O of ABC Ltd. Which deals in the manufacturing of toys. It earned ₹2,00,000 net profit for the year 2021-22. They transferred ₹20,000 to General Reserve. Kavita is concerned about the Cash Position of the company. She enquired with the different departments of the company about their cash positions. It was acknowledged that the company has received ₹85,000 cash from its manufacturing activities. There was a sale of an old machine for ₹1,00,000 (Book Value ₹1,20,000). The Preference shares were redeemed for ₹2,00,000. Interest Received on Investment and Interest paid on Debentures were ₹10,000 and ₹20,000 respectively.

What will be the Net Profit Before tax and extra ordinary items of ABC Ltd.?

₹2,20,000

The correct answer is option 2- ₹2,20,000.

Net Profit = ₹2,00,000
Add: Transfer to Reserve = 20,000
Net Profit before tax and extra ordinary items = (2,00,000 + 20,000)
                                                                         = ₹2,20,000