Goodwill Settlement

Correct answer: A. In gaining ratio

First calculate the retiring partner goodwill share. Then charge it to gaining partners in gaining ratio.

Correct answer: A. Correct

The retiring partner share is calculated by old profit ratio. The burden on continuing partners is charged in gaining ratio.

Correct answer: C. ₹36,000

Goodwill due to the retiring partner = Total goodwill × Partner’s share = ₹1,35,000 × \(\frac{4}{15}\). Dividing ₹1,35,000 by 15 gives ₹9,000, and multiplying it by 4 gives ₹36,000. Therefore, option C is correct. Option B results from not multiplying the quotient by the numerator 4. Exam tip: For such calculations, divide by the denominator first and then multiply by the numerator.

Correct answer: B. ₹18000

The second partner share is ( \frac{3}{7} ). Therefore his burden is (42000 \times \frac{3}{7}=18000).

Correct answer: C. ₹40000

The first partner share is ( \frac{5}{7} ). Therefore his burden is (56000 \times \frac{5}{7}=40000).

Correct answer: A. 1:1

A gain is ( \frac{4}{5}-\frac{7}{10}=\frac{1}{10} ) and B gain is ( \frac{1}{5}-\frac{2}{10}=0 ). Therefore only A gains and the burden is on A alone.

Correct answer: B. ₹24,000

When goodwill already appearing in the books is written off, the partners’ capital or current accounts are debited in their old profit-sharing ratio, while the Goodwill Account is credited. The ratio 5:4:3 contains 12 total parts. The third partner’s share is therefore 3/12, or one-fourth of the recorded goodwill. His debit is calculated as ₹96,000 × 3/12 = ₹24,000. Hence option B is correct. Option A would represent 2/12, option C would represent 4/12, and option D would represent 5/12. Those fractions belong to neither the third partner’s stated share nor the required old ratio. The key point is that writing off existing goodwill uses the old ratio, not a new ratio or a gaining ratio.

Correct answer: C. ₹90,000

The governing concept is that, on the death of a partner, the deceased partner is entitled to the proportionate share of the firm’s goodwill. This amount is credited to the deceased partner’s Capital Account or directly to the Executor’s Account because it forms part of the amount payable to the estate. The calculation is: goodwill share = total goodwill × deceased partner’s fraction = ₹3,24,000 × 5/18. First, ₹3,24,000 ÷ 18 = ₹18,000; then ₹18,000 × 5 = ₹90,000. Therefore, option C is correct. Option A uses 3/18, option B uses 4/18, and option D uses 6/18, so those amounts do not represent the stated 5/18 share.

Correct answer: A. Sacrificing partner

A partner is called a sacrificing partner when his share of future profits becomes smaller than his former share. The reduction represents a sacrifice of profit entitlement for the benefit of another partner whose share increases. In goodwill adjustment, the gaining partner compensates the sacrificing partner for this sacrifice, usually by an entry based on the gaining and sacrificing ratios. Therefore option A is correct. A gaining partner has an increased share, whereas a retiring partner has left the firm and a creditor is an outside claimant, so neither describes the continuing partner whose share has decreased.

Correct answer: A. Hidden goodwill will generally not be assumed

The governing idea is that hidden goodwill is normally identified from a positive excess of the amount due to the retiring partner over the partner’s adjusted capital. That excess is treated as the partner’s share of unrecorded goodwill. If the partner receives less than the adjusted capital, there is no positive excess on which to base such a calculation. Therefore hidden goodwill should generally not be assumed from the information given. Option A is correct, although additional facts such as losses, liabilities, or special adjustments could change the settlement. Option B is too absolute; no rule doubles goodwill, and goodwill is not automatically transferred only to a bank account.

Correct answer: C. ₹1,69,000

The governing relationship is partner’s share of goodwill = total goodwill × partner’s fraction. The credited amount of ₹52,000 represents 4/13 of the total goodwill. Therefore, total goodwill = ₹52,000 ÷ (4/13) = ₹52,000 × 13/4. Dividing ₹52,000 by 4 gives ₹13,000, and multiplying ₹13,000 by 13 gives ₹1,69,000. Thus option C is correct. A direct check confirms the result: ₹1,69,000 × 4/13 = ₹52,000. Option A gives only ₹40,000 when multiplied by 4/13, option B gives ₹48,000, and option D gives ₹64,000. Hence none of the alternatives except C satisfies the stated partner’s share.

Correct answer: C. ₹140,000

Under the memorandum method, goodwill is adjusted through the partners’ accounts and ultimately written off in the continuing partners’ new profit-sharing ratio. The new ratio of A and B is 5:7, so the total is 12 parts. B’s share of the amount written off is therefore 7/12. Calculation: ₹2,40,000 × 7/12. Since ₹2,40,000 ÷ 12 = ₹20,000, multiplying by 7 gives ₹1,40,000. Thus option C is correct. ₹1,00,000 represents A’s 5/12 share, while ₹80,000 and ₹1,60,000 do not correspond to B’s 7/12 share. The ratio must be applied to the full goodwill amount.