What is the correct sequence for solving a complex goodwill adjustment question at the time of reconstitution?

Correct answer: Write off old goodwill, calculate the required new goodwill adjustment, and allocate the burden in the gaining ratio

The governing concept is that goodwill adjustments at reconstitution must reflect both the previous entitlement and the revised entitlement. First identify whether existing goodwill is to be written off or adjusted. Next calculate the required goodwill amount under the stated method. Finally, charge or distribute that amount to the partners who gain from the change, using their gaining ratio, unless the question expressly specifies another basis. This prevents double counting and preserves the correct compensation for sacrificing or gaining partners. Option A is correct. Option B ignores essential old-ratio information, option C concerns an unrelated bank procedure, and option D substitutes capital ratio for the profit-sharing basis without authority.