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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:

Solution

✅ Correct Option: 3

Work backwards from goodwill.

Super Profit =6,00,0002=3,00,000= \frac{6,00,000}{2} = 3,00,000

Capital Employed =18,00,000+12,00,000=30,00,000= 18,00,000 + 12,00,000 = 30,00,000

Normal Profit =30,00,000×15%=4,50,000= 30,00,000 \times 15\% = 4,50,000

Average Profit == Normal Profit ++ Super Profit =4,50,000+3,00,000=7,50,000= 4,50,000 + 3,00,000 = 7,50,000

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