Goodwill Settlement

Correct answer: A. 1:1

Under the old ratio, A and B each had a share of 4/10. Under the new ratio, each receives 5/10. Thus, A's gain is 5/10 − 4/10 = 1/10 and B's gain is 5/10 − 4/10 = 1/10. Therefore, their gaining ratio is 1/10:1/10 = 1:1. Exam tip: calculate each continuing partner's gain as new share minus old share; do not use the new ratio alone.

Correct answer: C. No goodwill debit

Zero gain means no goodwill burden for that partner. Only gaining partners' capital accounts are debited.

Correct answer: A. 1/10

B’s old profit share was 5/10, or 1/2. Under the new ratio, B’s share is 3/5, or 6/10. Therefore, B’s gain = New share − Old share = 6/10 − 5/10 = 1/10. Exam tip: Calculate a partner’s gain by subtracting the old share from the new share.

Correct answer: A. C gains 1/10

C's old share was 3/10. Under the new ratio of 3:2, C's share becomes 2/5, or 4/10. Therefore, C's gain is 4/10 − 3/10 = 1/10. After a partner's retirement, a gaining partner compensates the retiring partner for goodwill in the gaining ratio. For exams, convert the old and new shares to a common denominator before determining gain or sacrifice.

Correct answer: A. 1:1

B and C each gain one tenth so the burden ratio is 1:1. Goodwill burden is determined only by gaining ratio.

Correct answer: B. Goodwill account

In indirect or capital adjustment method goodwill account is not opened. The effect is given directly through capital accounts.

Correct answer: C. ₹24000

The retiring partner’s goodwill compensation is calculated as: total goodwill × the partner’s share = ₹180000 × 2/15 = ₹24000. For quick calculation, divide ₹180000 by 15 to get ₹12000 and multiply it by 2. Therefore, option C is correct.

Correct answer: A. A: ₹21,000; B: ₹35,000

The total of the gaining ratio is 3 + 5 = 8. Therefore, the debit effect on A’s capital account is ₹56,000 × 3/8 = ₹21,000, while B’s debit effect is ₹56,000 × 5/8 = ₹35,000. The continuing partners bear the deceased partner’s goodwill in their gaining ratio. Option B reverses the ratio. Exam tip: Note the word “respectively” and add the ratio terms before calculating.

Correct answer: C. Incorrect because old goodwill is written off in old ratio and new goodwill is adjusted in gaining ratio

Old goodwill belongs to all old partners while new goodwill burden is borne by gainers. This difference is very important in exams.

Correct answer: B. B

B's old share was four tenth and new share is three tenth so B sacrifices. Identify negative differences while calculating gains.

Correct answer: A. A only

A's share has increased and B's has decreased so only A gains. New goodwill burden falls only on the gaining partner.

Correct answer: A. ₹ 24000

The second partner's share is three eighth so the burden on ₹ 64000 is ₹ 24000. Capital debit equals the burden.

Correct answer: B. Retiring partner's capital account

The retiring partner receives the right so his capital account is credited. Continuing partners' accounts are debited.

Correct answer: A. B has zero gain

B's old share is two tenth and new share is one fifth which is two tenth. Therefore B's gain is zero.

Correct answer: A. A only

A's share rises from five tenth to eight tenth while B's share remains same. Therefore the whole gain goes to A.

Correct answer: C. ₹36,000

A retiring partner’s claim for goodwill is calculated as total goodwill multiplied by the partner’s old share. Thus, ₹96,000 × \(\frac{3}{8}\) = ₹36,000. Option B would result from using a one-third share, so it is incorrect. Exam tip: For retirement, calculate the outgoing partner’s goodwill claim using the old profit-sharing ratio.

Correct answer: A. Retiring partner's claim is based on old share and burden is based on gaining ratio

Goodwill adjustment at retirement has two separate ideas. First, the retiring partner must receive compensation for the goodwill share that belongs to the period before retirement. This claim is normally calculated using the partner’s old profit-sharing ratio. Second, the continuing partners receive the retiring partner’s share and therefore bear the goodwill adjustment in the proportion in which they gain that share. This is called the gaining ratio.

Therefore, the claim and the burden need not use the same ratio. Option A correctly states that the retiring partner’s claim is based on the old share, while the continuing partners’ burden is based on the gaining ratio. The other options incorrectly use the new ratio, capital ratio, or cash ratio as a universal basis. Exact journal entries may depend on the method used, but the principle in option A is the standard one.

Correct answer: A. A

A's old share is four tenth and new share is two fifth which is four tenth. So A has not gained.

Correct answer: A. 0:1:0

A and C's shares did not increase while B's share rose from three tenth to four tenth. Therefore only B gained.

Correct answer: B. ₹25,000 debited

The governing rule is that, on a partner’s retirement, the retiring partner’s goodwill compensation is borne by the continuing partners in their gaining ratio. Here only B has gained, so B’s gaining share is the entire adjustment, or 1. The amount payable for D’s goodwill is ₹25,000; therefore B’s Capital Account must be debited by ₹25,000 and D’s Capital or Executor’s Account is credited by the same amount. Option A reverses the accounting effect, option C ignores the goodwill adjustment, and option D assumes an unsupported half share.

Correct answer: A. The gainer will bear the burden

The governing principle is that goodwill adjustment must compensate the partner whose goodwill interest is surrendered and charge the partners who gain from the change. After old goodwill is written off and the new adjustment is recorded, the final debit burden should fall on the gaining partner or partners in the gaining ratio. This provides a practical check on the entries: the total debit to gainers should equal the total credit due to the retiring or sacrificing interest, subject to the method used. Option A states this rule. Capital size, seniority, or cash withdrawal does not determine the goodwill burden.

Correct answer: B. 1:0

A's share rose from three tenth to five tenth while B's share stayed five tenth. Therefore only A gained.

Correct answer: A. Gaining ratio

New goodwill burden should be shared in gaining ratio not in new ratio. For correction calculate the actual gain.

Correct answer: C. ₹ 30000

C's share is two fifth so the burden on ₹ 75000 is ₹ 30000. Do not forget to add total ratio parts even with three partners.

Correct answer: A. Goodwill burden is under-debited by ₹ 6000

Total debit should equal the credit to the retiring partner. The difference of ₹ 6000 shows under-debit.