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A, B and C share profits in the ratio 3:1:6. C retires, and the goodwill of the firm is valued at ₹50,000. What will be C’s share of goodwill?

Answer and explanation

Correct answer: ₹30,000

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.

Related tags

GoodwillPartner-RetirementProfit-Sharing-RatioAccountancyNumericalGoodwill SettlementReconstitution Retirement Or Death Of A PartnerClass 12 Mcq

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