Question

The adjustment required for overvaluation of closing stock, while calculating adjusted profit for calculating goodwill is:
(A) reduction from concerned years profit.
(B) reduction from next years profit.
(C) addition to next years profit.
(D) addition to previous years profit.
Choose the correct answer from the options given below :

• A. (A), (B), and (D) only
• B. (A) and (C) only
• C. (A) and (D) only
• D. (B), (C), and (D) only

Answer 1

Answer: (C)

(A) and (D) only

Answer 2

To correct overvaluation of closing stock, adjustments involve reduction from the concerned years profit and addition to the previous years profit.
Hence, the correct answer is Option 3.