| Read the following hypothetical text and answer the given questions: |
| Kia, Gia and Sia were partners in a firm sharing profits and losses equally. The firm was engaged in the storage and distribution of canned juice and its godowns were located at three different places in the city. Each godown was being managed individually by Kia, Gia and Sia. Because of increase in business activities at the godown managed by Gia, she had to devote more time. Gia demanded that his share in the profits of the firm be increased, to which Kia and Sia agreed The new profit sharing ratio was agreed to be 1:2:1. |
| For this purpose, the goodwill of the firm was valued at two years' purchase of the average profits of last five years. |
| The profits of the last five years were as follows: |
| Year Profit (Rs.) |
| I 4,00,000 |
| II 4,80,000 |
| III 7,33,000 |
| IV (Loss) 33,000 |
| V 2,20,000 |
| Based on the above information you are required to answer the following questions: |
| Average profit of the firm will be: |
A) Rs. 18,00,000
B) Rs. 7,20,000
C) Rs. 3,60,000
D) Rs. 9,33,000
Correct Answer: C
Solution :
| [c] Rs. 3,60,000 |
| Hint: Average Profits |
| =\[\frac{4,00,000+4,80,000+7,33,000-33,000+2,20,000}{5}\] |
| = \[\frac{18,00,000}{5}\]= Rs. 3,60,000 |
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