Goodwill Settlement

Correct answer: A. A only

When a partner retires, goodwill is borne by the continuing partners in their gaining ratio. The old shares are A = 7/10, B = 2/10 and C = 1/10. After C retires, the new ratio is A:B = 4:1, so A has 4/5 = 8/10 and B has 1/5 = 2/10. A gains 1/10, while B gains nothing. Therefore only A bears the goodwill burden, making choice A correct.

The comparison must be made separately for each continuing partner. A’s share rises from 7/10 to 8/10, but B’s share remains 2/10. Since goodwill compensation is paid to the retiring partner by the partner who obtains the additional share, the entire adjustment falls on A. It is not divided equally or in the old ratio.

Correct answer: A. The burden ratio was reversed

The correct gaining ratio was 2:1 but the burden was reversed. Match the ratio order with the partner order.

Correct answer: A. One twelfth

B's new share is seven twelfth and old share is three sixth which is six twelfth. Therefore gain is one twelfth.

Correct answer: A. One twelfth

C's new share is five twelfth and old share is two sixth which is four twelfth. Therefore gain is one twelfth.

Correct answer: C. 1 : 1

Before A’s retirement, B’s share is 3/6 = 6/12, which becomes 7/12; hence B gains 1/12. C’s old share is 2/6 = 4/12, which becomes 5/12; hence C also gains 1/12. Since both continuing partners gain equally, the goodwill burden-sharing ratio is 1 : 1. Exam tip: Compensation for a retiring partner’s goodwill is borne by the continuing partners in their gaining ratio, not in their new profit-sharing ratio.

Correct answer: A. Additional debit of ₹ 2000 is needed

Total debit is short of total credit by ₹ 2000. Additional debit must be made to continuing partners in gaining ratio.

Correct answer: B. B

The total of the old ratio is 10. B’s old profit share was 2/10, and the new share is also 2/10; therefore, B has no increase in profit share. In contrast, A’s share rises from 2/10 to 3/10, and D’s share rises from 3/10 to 5/10. Exam tip: Calculate new share − old share for each continuing partner to identify the gain.

Correct answer: A. 1:0:2

The direct answer is A, 1:0:2. The old ratio A:B:C:D is 2:2:3:3, whose total is 10. Therefore old shares are A=2/10, B=2/10, and D=3/10. C retires, and the new ratio A:B:D is 3:2:5, also totaling 10. Thus new shares are A=3/10, B=2/10, and D=5/10. Calculate gains by subtracting old share from new share: A gains 3/10−2/10=1/10; B gains 2/10−2/10=0; D gains 5/10−3/10=2/10. The common denominator is removed, giving 1:0:2. Option A is correct. Option B merely repeats the new ratio, not the gains. Option C gives old ratio parts and includes the retiring partner, so it is unsuitable. Option D assumes equal gains, which the calculation disproves. Use the sequence: write old shares, write new shares, subtract, then simplify.

Correct answer: C. ₹32,000

The total of the gaining ratio is 1+0+2=3. D's gaining share is 2, so D's burden = ₹48,000 × 2/3 = ₹32,000. The partner with zero gain bears no part of the burden. In the exam, divide the concerned partner's ratio by the total gaining ratio and multiply it by the goodwill amount.

Correct answer: A. B

B's share changes from five twelfth to two fifth which is twenty four sixtieth. This is less than old twenty five sixtieth.

Correct answer: B. C only

B sacrifices and C's share increases. Therefore the new goodwill burden falls only on gaining partner C.

Correct answer: A. Debited by ₹ 72000

C receives the whole gain so the whole goodwill burden falls on C. The gaining partner's capital account is debited.

Correct answer: A. Goodwill account

When full goodwill is raised the goodwill account is first debited. Later it is written off in the appropriate ratio.

Correct answer: A. All old partners in old ratio

Full goodwill belongs to the old firm so all old partners are credited in old ratio. Then further adjustment is made separately.

Correct answer: A. On gaining partners

The procedure may differ but the final economic burden falls on gainers. Check the result with the principle.

Correct answer: B. B

B’s old share was 7/15, whereas his new share is 3/8. Since 3/8 is less than 7/15, B’s share has decreased, so B makes the sacrifice. A’s share increases from 3/15 to 5/8, so A gains. In the examination, compare each partner’s old share with the new share to identify the sacrificing partner.

Correct answer: A. A only

Under the old ratio, A’s share was \(3/15=1/5\), which rises to \(5/8\) under the new ratio. Thus, A gains \(5/8-1/5=17/40\). B’s share falls from \(7/15\) to \(3/8\), so B is a sacrificing partner rather than a gaining partner. Therefore, only A bears the goodwill compensation payable to C. Exam tip: In retirement questions, compare each continuing partner’s new share with the old share to identify the gaining partner(s).

Correct answer: A. A capital debited and C capital credited

Only A gains so A's capital is debited and retiring C's capital is credited. This is direct adjustment.

Correct answer: B. ₹ 24000

Total goodwill is ₹ 216000 and one ninth of it is ₹ 24000. In super profit method multiply super profit by years' purchase.

Correct answer: C. ₹18,000

The total parts of the gaining ratio are 2 + 1 + 3 = 6. The third partner’s share is 3 parts, so the amount borne by that partner is ₹36,000 × 3/6 = ₹18,000. Goodwill compensation is borne by the gaining partners in their gaining ratio. Exam tip: Add all ratio parts first, then multiply the total amount by the concerned partner’s ratio share.

Correct answer: A. When his new share is less than old share

A partner whose share decreases sacrifices and may receive compensation in some cases. Only gaining partners should be debited.

Correct answer: A. A gains

A's old share is two fifteenth and new share is one fifth which is three fifteenth. Therefore A gains one fifteenth.

Correct answer: C. One third

C's new share is four fifth which is twelve fifteenth and old share is seven fifteenth. The gain is five fifteenth which is one third.

Correct answer: A. 3:4

Under the old ratio, A's share was 3/6 = 1/2 and B's share was 2/6 = 1/3. Under the new ratio, A's share is 4/7 and B's share is 3/7. Therefore, A's gain = 4/7 − 1/2 = 1/14, while B's gain = 3/7 − 1/3 = 2/21. Hence, the gaining ratio is 1/14 : 2/21 = 3:4. Option 4:3 is the new profit-sharing ratio, not the gaining ratio. Exam tip: Calculate gaining ratio using new share minus old share.

Correct answer: A. ₹35,000

The total ratio is 3 + 2 + 1 = 6, so C’s old profit-sharing share is 1/6. Therefore, C’s share of goodwill = ₹2,10,000 × 1/6 = ₹35,000. ₹70,000 represents a 1/3 share and may result from misreading C’s ratio. Exam tip: For a retiring partner’s goodwill claim, multiply the firm’s total goodwill by the partner’s old profit-sharing fraction.