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The retiring partner goodwill share is ₹99000 and gaining ratio is 4:7. Under direct method how much will the first gaining partner be debited?

Answer and explanation

Correct answer: ₹36000

The direct answer is B, ₹36,000. The retiring partner’s goodwill claim is ₹99,000, and the gaining ratio of the continuing partners is 4:7. The total ratio is 4 + 7 = 11. Therefore the first gaining partner’s fraction of the goodwill is 4/11. His debit is ₹99,000 × 4/11. Since ₹99,000 ÷ 11 = ₹9,000, the amount is ₹9,000 × 4 = ₹36,000. Option B is correct. Option A, ₹27,000, equals 3/11 of ₹99,000 and does not use the first partner’s ratio of 4. Option C, ₹63,000, is the second partner’s amount, because ₹99,000 × 7/11 = ₹63,000. Option D, ₹99,000, is the whole goodwill claim, not the first partner’s share. In the direct method, gaining partners are debited and the retiring partner is credited with the amount due. Memory cue: divide the total goodwill according to the gaining ratio, then debit each gainer’s own portion.

Related tags

GoodwillDirect-MethodEntry

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