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On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.?
Most Upvoted Answer
On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ...
Calculation of Goodwill
Before calculating the average profit of the firm, let's first calculate the goodwill of the firm.
Goodwill = Super Profit x Number of Years of Purchase
Given, the super profit is ₹60,000 and the number of years of purchase is four.
Therefore, Goodwill = ₹60,000 x 4 = ₹2,40,000
Calculation of Average Profit
Average profit can be calculated using the formula:
Average Profit = Total Profit / Number of Years
To calculate the total profit of the firm, we need to consider the assets, liabilities, and capital accounts of the firm.
Total Assets = ₹1,00,000 + ₹20,000 (stock) = ₹1,20,000
Total Liabilities = ₹10,000 (current liabilities)
Therefore, the Capital of the firm = Total Assets - Total Liabilities = ₹1,10,000
Now, we need to add the reserve to the capital, as it is also a part of the capital.
Capital = ₹1,10,000 + ₹10,000 (reserve) = ₹1,20,000
The Capital of the firm at the start of the year was ₹60,000. Therefore, the profit of the firm for the year can be calculated as:
Profit = Capital at the end of the year - Capital at the start of the year
Profit = ₹1,20,000 - ₹60,000 = ₹60,000
Hence, the average profit of the firm can be calculated as:
Average Profit = Total Profit / Number of Years
Number of Years = 4 (as given in the question)
Average Profit = ₹60,000 / 4 = ₹15,000
Therefore, the average profit of the firm is ₹15,000.
Before calculating the average profit of the firm, let's first calculate the goodwill of the firm.
Goodwill = Super Profit x Number of Years of Purchase
Given, the super profit is ₹60,000 and the number of years of purchase is four.
Therefore, Goodwill = ₹60,000 x 4 = ₹2,40,000
Calculation of Average Profit
Average profit can be calculated using the formula:
Average Profit = Total Profit / Number of Years
To calculate the total profit of the firm, we need to consider the assets, liabilities, and capital accounts of the firm.
Total Assets = ₹1,00,000 + ₹20,000 (stock) = ₹1,20,000
Total Liabilities = ₹10,000 (current liabilities)
Therefore, the Capital of the firm = Total Assets - Total Liabilities = ₹1,10,000
Now, we need to add the reserve to the capital, as it is also a part of the capital.
Capital = ₹1,10,000 + ₹10,000 (reserve) = ₹1,20,000
The Capital of the firm at the start of the year was ₹60,000. Therefore, the profit of the firm for the year can be calculated as:
Profit = Capital at the end of the year - Capital at the start of the year
Profit = ₹1,20,000 - ₹60,000 = ₹60,000
Hence, the average profit of the firm can be calculated as:
Average Profit = Total Profit / Number of Years
Number of Years = 4 (as given in the question)
Average Profit = ₹60,000 / 4 = ₹15,000
Therefore, the average profit of the firm is ₹15,000.
Community Answer
On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ...
Goodwill= super profit *no. of purchase year
60000 = super profit * 4
super profit = 60000/4 = 15000
super profit=actual average profit(AAP) - normat profit
15000 = AAP - 8800
AAP. = 15000+8800
=. 23800
AAP = Avg. profit - remuneration to partners
23800 = avg profit - 0
23800= average profit. = ANS
WORKING NOTE.....*
Normal profit = capital employed - NRR
= 1,10000 - 8/10
= 8800
Capital employed= Total asset - current liabilities
= 120000 - 10000
= 1,10000
60000 = super profit * 4
super profit = 60000/4 = 15000
super profit=actual average profit(AAP) - normat profit
15000 = AAP - 8800
AAP. = 15000+8800
=. 23800
AAP = Avg. profit - remuneration to partners
23800 = avg profit - 0
23800= average profit. = ANS
WORKING NOTE.....*
Normal profit = capital employed - NRR
= 1,10000 - 8/10
= 8800
Capital employed= Total asset - current liabilities
= 120000 - 10000
= 1,10000
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On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.?
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On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.?.
On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 1st April, 2014, a firm had assets of ₹1,00,000 excluding stock of ₹20,000.Partners capital accounts showed a balance of ₹60,000. The current liabilities were ₹10,000 and the balance constituted the reserve. If the normal rate of return is 8%, the `Goodwill` of the firm is valued at ₹60,000 at four years of purchase of super profit, find the average profit of the firm.?.
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