Goodwill Settlement

The retiring partner share is ₹25000. In 2:3 the first partner burden is (25000 \times \frac{2}{5}=10000).

In the old ratio 3:2:1, partner C has 1 out of 6 total parts. Therefore, C’s share of goodwill is ₹60,000 × 1/6 = ₹10,000. When old goodwill is written off, each partner’s account is debited according to the old profit-sharing ratio. ₹20,000 represents a 1/3 share, not C’s 1/6 share. Exam tip: For writing off goodwill, distribute its book value among the partners in their old ratio.

The excess payment is treated as his goodwill share. Total hidden goodwill is (20000 \times 3=60000).

Goodwill share is part of the amount payable to the executor. Adding it increases the credit balance of executor account.

Without opening goodwill account gaining partners can be debited and retiring partner can be credited. This is a modern and simple method.

The retiring partner will not share future profits so he receives his share of goodwill. Remember it with his old profit share.

The retiring partner entitlement is based on his old profit share. New ratio is relevant only for continuing partners.

The burden is borne by partners whose future profit share increases. Therefore gaining ratio is used.

Old goodwill belongs to old partners so it is written off in old ratio. Fresh retirement goodwill is then adjusted separately.

Under this method only partners capital accounts are adjusted. New goodwill is not shown as an asset.

C’s share in the profit-sharing ratio is \(\frac{1}{7+2+1}=\frac{1}{10}\). Therefore, C’s share of goodwill is \(₹70,000 \times \frac{1}{10}=₹7,000\). ₹14,000 would result from incorrectly taking C’s share as \(\frac{1}{5}\). Exam tip: first add all ratio terms, then find the retiring partner’s fraction.

B’s old profit-sharing share is 5 out of the total ratio of 10. Therefore, B’s share of goodwill = ₹90000 × \(\frac{5}{10}\) = ₹45000. Option B represents A’s share, calculated using \(\frac{3}{10}\), so it is incorrect. Exam tip: For a retiring partner, calculate the goodwill share using the partner’s old profit-sharing ratio unless another adjustment is specified.

The total parts of the profit-sharing ratio are 4 + 1 + 5 = 10. A’s share is \(\frac{4}{10}\). Therefore, the amount payable to A’s executor for goodwill is ₹1,00,000 × \(\frac{4}{10}\) = ₹40,000. ₹20,000 is not correct because it does not represent A’s \(\frac{4}{10}\) share. Exam tip: In a partner’s death or retirement, calculate the partner’s old share in the firm’s goodwill.

C’s share in the profit-sharing ratio is \(\frac{3}{2+5+3}=\frac{3}{10}\). Therefore, ₹24,000 represents \(\frac{3}{10}\) of the firm’s total goodwill. Total goodwill \(= ₹24,000 \times \frac{10}{3}=₹80,000\). The closest distractor, ₹60,000, would give C only ₹18,000, not ₹24,000. Exam tip: To find total goodwill from a partner’s share, divide that share by the partner’s fractional share in the profit-sharing ratio.

A’s share in the old profit-sharing ratio is \(\frac{1}{1+2+2}=\frac{1}{5}\). Therefore, A’s share of goodwill is \(₹75,000 \times \frac{1}{5}=₹15,000\). The amount ₹30,000 represents the \(\frac{2}{5}\) share of either B or C, not A’s share. Exam tip: For a retiring partner, multiply the total goodwill by that partner’s old profit-sharing fraction.

A gain is ( \frac{3}{5}-\frac{4}{9}=\frac{7}{45} ) and B gain is ( \frac{2}{5}-\frac{2}{9}=\frac{8}{45} ). The correct ratio is 7:8 so none of the listed ratios is correct.

A share increases from ( \frac{5}{10} ) to ( \frac{4}{5} ) while B share decreases. So only A actually gained.

Both A and C shares rise from ( \frac{3}{10} ) to ( \frac{5}{10} ). Their gain is equal so the ratio is 1:1.

A gain is ( \frac{5}{10}-\frac{2}{10}=\frac{3}{10} ) and B gain is ( \frac{5}{10}-\frac{3}{10}=\frac{2}{10} ). So the gaining ratio is 3:2.

The retiring partner share is ₹16000. In 3:1 the first partner burden is (16000 \times \frac{3}{4}=12000).

The retiring partner share is ₹24000. In 5:3 the second partner burden is (24000 \times \frac{3}{8}=9000).

The total of the profit-sharing ratio is 6+2+2=10. B’s proportionate share is \(\frac{2}{10}\). Therefore, B’s share of goodwill = \(₹150000 \times \frac{2}{10}\) = ₹30000. ₹45000 would result from using \(\frac{3}{10}\), which is not B’s ratio. Exam tip: To calculate a partner’s share of goodwill, divide that partner’s ratio by the total ratio and multiply by total goodwill.

C’s share in the old profit-sharing ratio is \(\frac{6}{3+1+6}=\frac{6}{10}\). Therefore, C’s share of goodwill is \(₹50,000 \times \frac{6}{10}=₹30,000\). ₹20,000 represents a \(\frac{4}{10}\) share, not C’s share. Exam tip: for a retiring partner’s goodwill entitlement, first use the partner’s old profit-sharing fraction.

The total of the old profit-sharing ratio is 4 + 4 + 2 = 10, so A’s share is 4/10. A’s executor is entitled to A’s share of the firm’s goodwill: ₹1,25,000 × 4/10 = ₹50,000.

A new share is ( \frac{7}{12} ) and old share is ( \frac{5}{10} ) so gain is ( \frac{1}{12} ). C gain is ( \frac{1}{24} ) so the ratio is 2:1.