1.

On 1s' April 2016, an existing firm had assets of Rs. 10,00,000 including cash of Rs.20,000. Its creditors amounted to Rs. 50,000 on that date. The partner's capitalaccounts showed a balance of Rs. 8,00,000 while the reserve fund amounted to Rs.1,50,000. If the normal rate of return is 15% and the goodwill of the firm valued atRs. 1,80,000 at 3 years purchase of super profit, find the average profit of the firm.A firm has Current ratio of 3.5:1 and quick ratio of 2:1. Assuming Inventory at Rs.30,000. What will be the amount of Current Assets, Quick Assets?​

Answer»

Answer:

Step 1: Calculation of Capital Employed:

Capital Employed= TOTAL assets- CREDITORS

= 75000-5000

= 70000

Step 2: Calculation of Normal PROFIT:

Normal Profit= Capital Employed* [Normal Rate Of Return/100]

= 70000* [20/100]

= 14000

Step 3: Calculation of Super Profit from GOODWILL:

Super Profit= Goodwill/ Number of year's of purchase

= 24000/4

= 6000

Step 4: Calculation of AVERAGE Profit from Super Profit:

Average Profit= Super Profit+ Normal Profit

= 14000+6000

= 20000

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