Goodwill

Net assets are (2400000-700000-50000=₹1650000). Purchased goodwill is (1850000-1650000=₹200000).

A and B sacrifice equally, so sacrificing ratio is (1:1). B receives (80000 \times \frac{1}{2}=₹40000).

A's share remains (7/12), B's new share is (5/12-1/6=1/4), and C's is (1/6). With denominator (12), the ratio is (7:3:2).

Total capital based on C's capital is (250000 \times 5=₹1250000). Actual capital is (900000+250000=₹1150000), so goodwill is (₹100000).

Total capital based on C's capital is (180000 \times 4=₹720000). Actual total capital is (₹730000), so no positive hidden goodwill arises.

New partner's goodwill share is (420000 \times \frac{1}{7}=₹60000). Cash brought is (₹35000), so balance (₹25000) is debited.

Total ratio is (12) and the second partner's share is (4/12). Credit is (120000 \times \frac{4}{12}=₹40000).

B’s old profit share is \(\frac{2}{3+2+1}=\frac{1}{3}\). A retiring partner is credited with goodwill equal to his or her old share, so the amount credited is \(₹3,60,000 \times \frac{1}{3}=₹1,20,000\). The new ratio of A and C is relevant to their gaining ratio, but it does not change B’s old goodwill share. Exam tip: For a retiring partner, calculate goodwill compensation using the partner’s old profit-sharing fraction.

Retiring partner's goodwill share is (600000 \times \frac{1}{4}=₹150000). The second continuing partner's part is (150000 \times \frac{3}{5}=₹90000).

C's old profit-sharing ratio is 2/10, or 1/5. Therefore, the amount credited to C's Executor's Account is ₹5,00,000 × 1/5 = ₹1,00,000. Choosing ₹2,00,000 would incorrectly use the numerator 2 as a multiplier instead of converting the ratio into C's actual share. Exam tip: On a partner's death, calculate the deceased partner's share of goodwill using the old profit-sharing ratio.

Deceased partner's goodwill share is (720000 \times \frac{1}{6}=₹120000). First continuing partner's part is (120000 \times \frac{5}{6}=₹100000).

Under the old ratio 5:4, A's share is \(5/9\), while under the new ratio 2:1, A's share is \(2/3\). Therefore, A's gain is \(2/3-5/9=6/9-5/9=1/9\). B's share decreases from \(4/9\) to \(1/3\), so B suffers a loss of \(1/9\), not a gain. Exam tip: convert both ratios into fractions of the total profit and subtract the old share from the new share.

B's share decreases from (5/11) to (2/5). Sacrifice is (3/55) and credit is (330000 \times \frac{3}{55}=₹18000).

B is credited (₹60000) in old ratio and debited (₹120000) in new ratio. Net effect is debit (₹60000).

The old ratio shows the earlier claims of the three partners in total profits, while the new ratio shows their claims after reconstitution. To identify a gaining partner, compare each partner’s old fraction with the new fraction. Here the old ratio is 4:3:1, whose total is 8. Thus the old shares are 4/8, 3/8, and 1/8. The new ratio is 3:3:2, also totalling 8, so the new shares are 3/8, 3/8, and 2/8. The first partner falls from 4/8 to 3/8 and sacrifices 1/8. The second remains at 3/8. The third rises from 1/8 to 2/8 and gains 1/8. Therefore option A is correct.

The goodwill amount of ₹400,000 is not needed merely to identify who gains. It would be used to calculate the monetary compensation: the third partner’s gain is 1/8, so the amount would be ₹50,000 if adjustment were required. A common mistake is to compare only the numerators without considering the common total; here both ratios total eight, so the comparison is especially direct. Only the third partner gains, while the first sacrifices and the second is unchanged.

The third partner's old share is 1/8 and the new share is 2/8. Therefore, the partner's gain is 2/8 − 1/8 = 1/8. A gaining partner's account is debited with the partner's share of goodwill: ₹4,00,000 × 1/8 = ₹50,000. ₹1,00,000 is incorrect because the adjustment is based only on the additional gain of 1/8, not on the partner's entire new share. Exam tip: When the ratio changes, first calculate each partner's old and new share to identify the gaining or sacrificing partner.

Last year's adjusted profit is (₹260000). Weighted total is (₹2360000), so average is (₹236000).

Super profit = Average Profit − Normal Profit = ₹2,75,000 − ₹2,05,000 = ₹70,000. Under the capitalization of super profit method, Goodwill = Super Profit × 100 / Normal Rate of Return = ₹70,000 × 100 / 14 = ₹5,00,000. Therefore, option A is correct. Option B represents only the super profit, not goodwill. Exam tip: Capitalize super profit using the normal rate of return.

Capitalised value is (140000 \div 10%=₹1400000), which is less than actual capital. Therefore no positive goodwill arises.

A sacrifices (5/8-2/5=9/40) and B has negative sacrifice because he gains (1/40). Thus A alone actually sacrifices.

B's share increases from (3/8) to (2/5), gain is (1/40). Therefore B is debited (400000 \times \frac{1}{40}=₹10000).

New partner's goodwill share is (360000 \times \frac{1}{6}=₹60000). Third old partner receives (60000 \times \frac{1}{6}=₹10000).

Old partners are credited with the full goodwill share of the new partner. Total credit is (500000 \times \frac{1}{5}=₹100000).

A and B's old mutual ratio was (6:3=2:1), and new ratio is also (2:1). Therefore gaining ratio is (2:1).

The deceased partner's right is based on his old profit share. Continuing partners gain his share, so they are debited in gaining ratio.