Anil and Bharat are partners in a firm with capitals of Rs. 18,00,000 and Rs. 12,00,000 respectively. Normal rate of return is 15% and goodwill calculated at 2 years' purchase of super profits is valued at Rs. 6,00,000. The average profits of the firm would be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 7,50,000
Under the super profit method, goodwill = super profit × number of years’ purchase, and super profit = average profit − normal profit. Here the goodwill is given, so the sum is worked backwards.
Super profit = Rs. 6,00,000 ÷ 2 years = Rs. 3,00,000
Capital employed = Rs. 18,00,000 + Rs. 12,00,000 = Rs. 30,00,000
Normal profit = 15% of Rs. 30,00,000 = Rs. 4,50,000
Average profit = Rs. 3,00,000 + Rs. 4,50,000 = Rs. 7,50,000
Rs. 10,50,000 comes from adding the goodwill itself to the normal profit; the goodwill has to be divided by the years’ purchase first to get the super profit.
NCERT (2026-27 edition): |