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A firm's goodwill is valued at ₹1,20,000. If the retiring partner's share in the profit-sharing ratio is \(\frac{1}{4}\), what amount of goodwill is due to that partner?

Answer and explanation

Correct answer: ₹30,000

The retiring partner's share of goodwill is calculated as: Firm's goodwill × the partner's share = ₹1,20,000 × \(\frac{1}{4}\) = ₹30,000. Therefore, option A is correct. ₹40,000 would represent one-third of the goodwill, not one-fourth. Exam tip: Multiply the firm's total goodwill by the retiring partner's old profit-sharing fraction.

Related tags

Goodwill SettlementRetirement Of PartnerProfit Sharing RatioPartnership AccountsNumericalReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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