Sonu , one of the 3 partners in a firm , retired from business His share in profits - Accountancy - Reconstitution- Retirement/Death of a Partner

Question

Sonu , one of the 3 partners in a firm , retired from business His
share in profits and losses was 2/5 His share in goodwill of the
firm calculated on the basis of 2 years' purchase of superprofit
was Rs 20,000 and the firm's average annual profit was Rs 40,000 In
the same business normal rate of earning profit is 10% Calculate
the amount of capital invested in the firm

Neha A. · Accepted Answer

Dear Student,

Sonu's Share of Goodwill is given as Rs 20,000 (calculated on the
basis of 2 years' purchase of super profit)

Goodwill of the firm will be Rs 50,000 (20,000×52)

Now, we know that

Goodwill = Super Profit ×Number of Years' Purchasei
e
 50,000 = Super Profit ×2Super Profit = Rs 25,000

Also, we know

Super Profit=Average Profit-Normal Profit25,000=40,000-Normal ProfitNormal Profit = Rs 15,000

Based on this, the amount of capital invested in the firm can be
calculated as,

Amount of Capital Invested=Normal Profit×10010                                                 =15,000×10010= Rs 1,50,000