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Subjects
Class 12AccountancyReconstitution - Retirement or Death of a PartnerGoodwill SettlementMedium
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A, B and C share profits in the ratio 7:2:1. C retires, and the firm’s goodwill is ₹70,000. What is C’s share of goodwill?

Answer and explanation

Correct answer: ₹7,000

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.

Related tags

AccountancyGoodwillPartner RetirementProfit Sharing RatioNumericalGoodwill SettlementReconstitution Retirement Or Death Of A PartnerClass 12 Mcq
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10 more MCQs
  1. 1A retires, and the gaining ratio of B and C is 1:3. The goodwill adjustment is ₹40,000. How much of the goodwill adjustment will C bear?
  2. 2What is the correct formula of gaining ratio?
  3. 3If the deceased partner’s share of goodwill is ₹180000 and the continuing partners’ gaining ratio is 5:4, what is the burden of the first continuing partner?
  4. 4What is the main purpose of settling goodwill when a partner retires?
  5. 5When a firm's goodwill is valued at a partner's retirement, what determines the retiring partner's share of that goodwill?
  6. 6What are partners called when their share of profit increases after another partner retires?
  7. 7In what ratio do the continuing partners usually bear the goodwill compensation payable to a retiring partner?
  8. 8If goodwill is not to be shown in the books, which account is credited with the retiring partner's share of goodwill in the adjustment entry?
  9. 9In the usual goodwill adjustment entry on retirement, what happens to the capital accounts of the gaining partners?
  10. 10The firm's total goodwill is ₹60,000 and the retiring partner's old share is 1/3. What is the value of that partner's share of goodwill?
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