Goodwill Accounting

Correct answer: A. Write off old goodwill in old ratio

Existing old goodwill is first removed. New goodwill is raised only when the question clearly instructs it.

Correct answer: A. A (₹20000), B (₹28000)

Even when cash is not brought, full adjustment is made in sacrificing ratio. Dividing (₹48000) in (5:7) gives A (₹20000) and B (₹28000).

Correct answer: A. Only A

After C’s admission, A’s new share is 5/7 and B’s new share is 1/7. A’s sacrifice is 6/7 − 5/7 = 1/7, whereas B’s sacrifice is 1/7 − 1/7 = 0. Therefore, the entire ₹35,000 goodwill premium is credited only to A’s capital account. Exam tip: Goodwill premium is distributed among sacrificing partners in their sacrificing ratio.

Correct answer: A. ₹60,000

The new partner’s 1/5 share is sacrificed by the first and third partners in the ratio 1:3. Therefore, the third partner’s sacrifice is 1/5 × 3/4 = 3/20. His share of the premium is consequently ₹80,000 × 3/4 = ₹60,000. The amount ₹20,000 represents the first partner’s 1/4 share. Exam tip: When the sacrificing ratio is specified, distribute the goodwill premium in that ratio; use the old profit-sharing ratio only to determine the individual sacrifices.

Correct answer: A. (1/15)

Total sacrifice equals new partner's share (1/5=3/15). Since first sacrifices (2/15), second sacrifices (1/15).

Correct answer: A. (₹300000)

Add back abnormal loss to get normal average profit (₹150000). Goodwill is (₹150000 \times 2=₹300000).

Correct answer: A. ₹2,40,000

Total profit = ₹60,000 + ₹75,000 + ₹85,000 + ₹1,00,000 = ₹3,20,000. Average profit = ₹3,20,000 ÷ 4 = ₹80,000. Under the average profit method, goodwill = Average Profit × Number of Years’ Purchase = ₹80,000 × 3 = ₹2,40,000; hence, option A is correct. Option C is only the average profit, not the goodwill. Exam tip: Always calculate the average profit before multiplying it by the years’ purchase.

Correct answer: A. (₹12000)

Super profit is (₹36000) and total goodwill is (₹108000). New partner's share is (₹108000 \times 1/9=₹12000).

Correct answer: A. ₹20,000

Goodwill premium is distributed among the old partners in their sacrificing ratio. B’s share of the sacrificing ratio is \(2/(3+2)=2/5\). Therefore, B receives \(₹50,000 \times 2/5=₹20,000\). The old profit-sharing ratio of 8:2 is not required here because the sacrificing ratio is already given. Exam tip: Use the sacrificing ratio, not the old profit-sharing ratio, to distribute goodwill premium.

Correct answer: A. Zero

Estimated total capital is (₹425000) and actual total capital is (₹475000). Since actual capital is higher, hidden goodwill is taken as zero.

Correct answer: A. (₹30000)

Estimated total capital is (₹150000 \div 3/10=₹500000). Actual total capital is (₹470000), so goodwill is (₹30000).

Correct answer: A. (₹13333.33)

New partner's premium is (₹270000 \times 1/9=₹30000). The third partner's part is (4/9), so (₹13333.33) is credited.

Correct answer: A. He will not receive a share of premium

Premium for goodwill is given only to sacrificing partners. An old partner who gains is not entitled to premium.

Correct answer: A. (1:1)

Old shares are (4/9,5/9) and new shares are (3/9,4/9). Both sacrificed (1/9), so the sacrificing ratio is (1:1).

Correct answer: A. (₹54000)

Old partners are credited with the full premium (₹54000). Cash and current account are only modes of payment.

Correct answer: A. (70%)

Direct answer: Option A, 70%. When goodwill premium is credited to old partners, the full amount is first added to their capital or current accounts according to the sacrificing ratio. If they withdraw 30% of that credited premium, the remaining portion is 100% − 30% = 70%. Option A is correct. Option B, 30%, is the amount withdrawn, not the amount left. Option C, 100%, would be true only before any withdrawal. Option D, zero, would be true only if the entire 100% were withdrawn. The question asks about the part remaining in the capital accounts after the stated withdrawal, so subtraction from the whole is required. Memory cue: remaining percentage equals 100 minus withdrawn percentage.

Correct answer: A. (₹15000)

The correct answer is A, ₹15,000. Goodwill compensation brought by a new partner is distributed among the old partners in their sacrificing ratio. Here, total cash brought for goodwill is ₹25,000 and the first partner’s sacrificing share is 3 out of the total 3+2=5 parts. Therefore, first partner’s amount = ₹25,000 × 3/5 = ₹15,000. Option A is correct because it gives this exact amount. Option B, ₹10,000, represents 2/5 of ₹25,000, which belongs to the second partner. Option C, ₹24,000, is not obtained from the given ratio and is nearly the whole cash amount. Option D, ₹40,000, is greater than the cash actually brought, so it is impossible. Remember: divide goodwill compensation according to the sacrificing ratio, not the old profit-sharing ratio.

Correct answer: A. No entry

Direct answer: Option A, No entry. Although the goodwill amount is ₹65,000, the amount is paid privately by the new partner to the old partners. It does not enter the firm’s bank account and is not received by the firm. Step by step: identify the receiver; the old partners receive it personally. Identify the books affected; no firm account is affected. Therefore no journal entry is recorded in the firm. Option A is correct. Option B is wrong because the firm’s bank account is not debited or credited for this private transaction. Option C is wrong because no goodwill account is being recorded in the firm. Option D is wrong because the firm does not debit old partners’ capital for a payment made outside the business. The amount changes personal cash, not firm records. Memory cue: the size of private goodwill does not matter—private payment still means no entry.

Correct answer: A. ₹24,000

A and B’s old ratio of 9:6 simplifies to 3:2. Since both partners sacrifice in their old ratio, the goodwill premium is distributed in the ratio 3:2. B’s share is 2/5, so B receives ₹60,000 × 2/5 = ₹24,000. Exam tip: goodwill premium is credited to the sacrificing partners in the sacrificing ratio, not necessarily in the new profit-sharing ratio.

Correct answer: A. ₹30,000

The sacrificing ratio is \(\frac{2}{15}:\frac{1}{5}=2:3\). Therefore, the first partner receives \(\frac{2}{5}\) of the total premium: \(₹75,000\times\frac{2}{5}=₹30,000\). ₹45,000 is the second partner’s share because that partner made the larger sacrifice. Exam tip: Goodwill premium brought by a new partner is distributed among the old partners in their sacrificing ratio.

Correct answer: A. (2:0)

First partner's old share was (5/8) and new share is (3/8), so sacrifice is (2/8). Second partner's share remains (3/8), so sacrifice is zero.

Correct answer: A. (₹30000)

New partner's premium is (₹180000 \times 1/3=₹60000). First and second together have (3/6), so they receive (₹30000).

Correct answer: A. Full premium

Cash and adjustment are only modes of payment. Old partners are credited with the full premium in sacrificing ratio.

Correct answer: B. ₹18,000

The governing concept is the write-off of goodwill in the new profit-sharing ratio. The new ratio 2:2:1 has a total of 5 parts, so C’s new share is 1/5. When the goodwill account of ₹90,000 is written off, each partner’s capital or current account is debited according to the new ratio. C’s burden is therefore ₹90,000 × 1/5 = ₹18,000. Hence option B is correct. The old ratio of A and B is not used for this write-off because the question explicitly specifies the new ratio. Option A uses one-tenth, option C uses two-fifths, and option D uses three-fifths, none of which is C’s new share.

Correct answer: A. ₹15,000

The governing concept is distribution of the incoming partner’s goodwill premium among sacrificing partners in their sacrificing ratio. C acquires one-third of the firm, so the total goodwill compensation is ₹81,000 × 1/3 = ₹27,000. A and B sacrifice in their old ratio 5:4; therefore A receives 5/9 of the total compensation. A’s compensation is ₹27,000 × 5/9 = ₹15,000. Thus option A is correct. Option B is the entire premium attributable to C, option C uses an incorrect fraction of it, and option D exceeds the total compensation. The old ratio is essential because it determines how the sacrifice is shared.