| A and B are partners sharing profits and losses in the ratio of 3 : 1. They agree to take C into partnership for 1/3rd share. For this purpose, goodwill is to be valued at two year's purchase of the average profit of last four years which were as follows: |
| Year ending on 31st March 2018 = 4,00,000 |
| Year ending on 31st March 2019 = 5,00,000 |
| Year ending on 31st March 2020 = 6,00,000 |
| Year ending on 31st March 2021 = 7,00,000 |
| On a scrutiny of the accounts the following matters are revealed: |
| (i) An abnormal loss of Rs.50,000 was incurred during the year ended 31st March, 2018. |
| (ii) An abnormal Gain of Rs.50,000 was incurred during the year ended 31st March, 2020. |
| (iii) Closing Stock as on 31st March 2019 was undervalued by Rs.40,000. |
| (iv) Repairs to Car amounting to Rs.40,000 was wrongly debited to Car Account on 1st January, 2018. Depreciation was charged on Vehicles @ 10% p.a. on Straight Line Method. |
| (v) To cover management cost an annual charge of Rs.4,800 should be made for the purpose of goodwill valuation. |
| Adjusted Profit for the year ended 31.03.2020 will be: |
A) 6,39,200
B) 5,09,200
C) 5,39,200
D) 6,09,200
Correct Answer: B
Solution :
5,09,200
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