Which of the following sentence should be the SECOND sentence after the rerrangment ?

The para after reaarangement should read as:

(Here, the sentence number in question has been left unchanged for ease of understanding.)

(5) A beggar found a leather purse that someone had dropped in the marketplace. On opening it, he discovered that it contain 100 pieces of gold. Then he heared a merchant shout, “A Reward ! A reward to the one who finds my leather purse”. (A character of beggar, merchant is introduced along with event of beggar having found a purse. Hence, this is the first sentence.)

(3) Being an honest man, the beggar came forward and handed the purse to the merchant saying , “Here is your purse . May I have my reward now?” (This will logically be the next sentence as now beggar will give the purse to merchant as merchant has lost the purse which he has found.)

(1) The merchant greedily counted his gold and said “The purse I dropped had 200 pieces of gold in it. You've already stolen more than the reward ! I Go away or I will tell the police”.(The natural thing for merchant to do is count whether the money is intact or not and hence this forms the third sentence)

(6) “I am an honest man,” said the beggar defiantly. “let us take this matter to the court. The judge patiently listened to both sides of the story.(Beggar having been wrongfully accused of theft will want this matter to be settled in court so that he gets justice.)

(2) The judge, looking towards the merchant said, “you stated that the purse you lost contained 200 pieces of gold. Well ,that's a considerable cost. But the purse this beggar found had only 100 pieces of gold”.(The character of judge will now enter the storyline.)

(4) “This purse therefore cannot be the one you lost”? (This is the last sentence as all others have been arranged to for the para.)

Hence, the option is option E