Goodwill

Correct answer: A. Nil

Goodwill account is opened with an amount and written off with the same amount. Therefore the account is closed.

Correct answer: A. Approximately (₹153333)

Add (₹20000) to second year and deduct (₹40000) from third year. Adjusted total is (₹460000), so average is approximately (₹153333).

Correct answer: A. 2/5

A’s old profit share was 4/5, while his new share in the ratio 2:2:1 is 2/5. Therefore, A’s sacrifice = old share − new share = 4/5 − 2/5 = 2/5. Exam tip: For an existing partner, calculate sacrifice by subtracting the new share from the old share.

Correct answer: A. Debit B (₹50000)

B's share increases from (1/5) to (2/5), so he gains. Gain is (1/5) and debit is (250000 \times \frac{1}{5}=₹50000).

Correct answer: A. (₹100000)

Total capital is (150000 \times 6=₹900000) and actual capital is (650000+150000=₹800000). Hidden goodwill is (₹100000).

Correct answer: A. Approximately (₹33333)

New partner's goodwill share is (900000 \times \frac{1}{9}=₹100000). Second old partner's part is (100000 \times \frac{1}{3}), approximately (₹33333).

Correct answer: A. (2:1)

A's new share is (1/3) and old (2/10), so gain is (2/15). C's new share is (2/3) and old (5/10), so gain is (1/6), giving ratio (4:5).

Correct answer: A. (₹75000)

Second continuing partner's part is (135000 \times \frac{5}{9}=₹75000). In retirement continuing partners are debited in gaining ratio.

Correct answer: A. B (₹80000)

B's share decreases from (5/8) to (3/8), so B sacrifices. Sacrifice is (2/8=1/4) and credit is (₹80000).

Correct answer: A. He is debited for his gain

Goodwill burden is borne by gaining partners. Therefore even an old partner may be debited if he gains.

Correct answer: A. (₹270000)

The direct answer is option A: ₹2,70,000. The reported profit is ₹3,00,000, but it includes an abnormal profit of ₹45,000. Since that abnormal profit is not expected to continue, subtract it. The firm will also save a future expense of ₹15,000; a saving increases future profit, so add it. Step by step: starting profit ₹3,00,000; less abnormal profit ₹45,000 gives ₹2,55,000; add future expense saving ₹15,000 gives ₹2,70,000. Thus adjusted future profit = ₹3,00,000 − ₹45,000 + ₹15,000 = ₹2,70,000. Option A is correct. Option B, ₹2,55,000, removes the abnormal profit but forgets to add the future saving. Option C, ₹3,60,000, adds the abnormal profit or otherwise overstates the future profit; it does not follow the adjustment rule. Option D, ₹3,00,000, makes no adjustment at all. The key idea is that goodwill uses maintainable future profit: remove unusual income and include genuine future savings. A useful cue is “abnormal income subtract, expected saving add.” Carefully read whether an amount is a gain, a loss, an expense, or a saving before deciding its sign.

Correct answer: A. ₹3,00,000

Under the capitalization of average profit method, the capitalized value is calculated first: ₹2,70,000 ÷ 15% = ₹18,00,000. Goodwill = Capitalized value − Actual capital = ₹18,00,000 − ₹15,00,000 = ₹3,00,000. Therefore, option A is correct. Option B is only the capitalized value, not goodwill. Exam tip: Divide average profit by the normal rate and then subtract the actual capital.

Correct answer: A. Gaining partners are debited and sacrificing partners are credited

No cash is involved in internal adjustment. Partners gaining future profit compensate those sacrificing it.

Correct answer: A. A and B = 2:3

Under the old ratio, A’s share is 3/5 and B’s share is 2/5. In the new ratio 2:1:1, A’s share is 2/4 = 1/2 and B’s share is 1/4. Therefore, A’s sacrifice = 3/5 − 1/2 = 1/10, while B’s sacrifice = 2/5 − 1/4 = 3/20. Hence, the sacrificing ratio is 1/10 : 3/20 = 2:3. Option B is incorrect because both partners do not sacrifice equally. Exam tip: Calculate each old partner’s sacrifice as old share minus new share.

Correct answer: A. (₹60000)

C's goodwill share is (400000 \times \frac{1}{4}=₹100000). In sacrificing ratio (2:3), B receives (100000 \times \frac{3}{5}=₹60000).

Correct answer: A. Approximately (₹43333)

Average profit is approximately (₹293333) and after deducting future expense it becomes (₹273333). Super profit is approximately (₹43333).

Correct answer: B. Approximately (₹259333)

Add abnormal loss and deduct abnormal profit. Adjusted average is about (₹283333) and after future expense it becomes about (₹259333).

Correct answer: B. ₹3,00,000

Under the capitalization of average profit method, capitalized value = average profit × 100 ÷ normal rate of return = ₹2,52,000 × 100 ÷ 14 = ₹18,00,000. Goodwill = capitalized value − actual capital employed = ₹18,00,000 − ₹15,00,000 = ₹3,00,000. Therefore, option B is correct. Option C represents only the capitalized value of the business, not goodwill. Exam tip: Always subtract the actual capital employed from the capitalized value to find goodwill.

Correct answer: C. (₹240000)

Normal profit is (2400000 \times 12%=₹288000). Super profit is (₹60000) and goodwill is (60000 \times 4=₹240000).

Correct answer: D. ₹4,00,000

Under the capitalisation of super profit method, goodwill = super profit ÷ normal rate of return. Therefore, goodwill = ₹84,000 ÷ 21% = ₹84,000 ÷ 0.21 = ₹4,00,000. Option C results from treating 21% incorrectly as a multiplier. Exam tip: Convert the percentage rate into a decimal before dividing.

Correct answer: A. (₹189500)

Under annuity method goodwill (= super profit \times annuity factor). (50000 \times 3.79=₹189500).

Correct answer: A. (₹300000)

Net assets are (2800000-850000-50000=₹1900000). Purchased goodwill is (2200000-1900000=₹300000).

Correct answer: A. Only A

A's share falls from (4/7) to (3/8), while B's share rises from (3/7) to (3/8). So only A sacrifices.

Correct answer: A. Debit B (₹30000)

Check B's share: it decreases from (3/7) to (3/8). B sacrifices (3/56), so B should be credited (₹30000).

Correct answer: A. (₹110000)

C's share of goodwill is (560000 \times \frac{2}{8}=₹140000). A's credit is (140000 \times \frac{11}{14}=₹110000).