Calculate the Normal Rate of Return if the firm's normal profit is Rs. 30,000 , total assets are Rs. 5,30,000 , and external liabilities are Rs. 30,00 - Accountancy MCQ CUET Accountancy 2023 20 June Shift 2 2026 | ExamTest.live

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1 mark

Calculate the Normal Rate of Return if the firm's normal profit is Rs. 30, 000, total assets are Rs. 5, 30, 000, and external liabilities are Rs. 30, 000, for the purpose of valuing goodwill at the time of a partner's admission.

Solution & Step-by-step Explanation

First, let's calculate the Capital Employed by the firm: Capital Employed = Total Assets - External Liabilities Capital Employed = 5, 30, 000 - 30, 000 = Rs. 5, 00, 000 The formula for Normal Profit is: Normal Profit = Capital Employed \times \frac{Normal Rate of Return (NRR)}{100} Substitute the known values into the equation to find the NRR: 30, 000 = 5, 00, 000 \times \frac{NRR}{100} 30, 000 = 5, 000 \times NRR NRR = \frac{30 , 000}{5 , 000} = 6%

Try it yourself before checking the explanation above.

Calculate the Normal Rate of Return if the firm's normal profit is Rs. 30, 000, total assets are Rs. 5, 30, 000, and external liabilities are Rs. 30, 000, for the purpose of valuing goodwill at the time of a partner's admission.

5.6%

6%

5.3%

5%

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