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The average profit is ₹96,000, and goodwill is valued at two and a half years’ purchase. The retiring partner’s share in profits is 1/5. What amount of goodwill is due to him?

Answer and explanation

Correct answer: ₹48,000

Total goodwill = Average profit × Number of years’ purchase = ₹96,000 × 2.5 = ₹2,40,000. The retiring partner’s share is ₹2,40,000 × 1/5 = ₹48,000. Therefore, option C is correct. Exam tip: Calculate the firm’s total goodwill first, then apply the retiring partner’s profit-sharing ratio.

Related tags

Goodwill SettlementRetirement Of PartnerAverage ProfitYears PurchasePartnership AccountsReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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