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.

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

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capital invested = average profit x100/10 = 40000 x 100/10 = 400000
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