Question

A, B and C were partners in a firm sharing profits in the ratio of 1 : 2 : 2. On 1st July, 2025 A retired and the new profit sharing ratio of B and C was 3 : 2. Goodwill of the firm was valued at ₹ 4,00,000. Workmen Compensation Reserve appears in the books at ₹ 2,00,000 and there is a claim of ₹ 80,000 against it. Investment Fluctuation Reserve appears in the books at ₹ 1,00,000 when Investments (Market Value ₹ 6,00,000) appear at ₹ 10,00,000. Advertisement Suspense Account appears in the books at ₹ 50,000.

You are required to answer the following questions:

In respect of goodwill:

Options

• B and C will be debited by ₹ 40,000 each

• B and C will be debited by ₹ 48,000 and ₹ 32,000 respectively

• B will be debited by ₹ 80,000

• B will be credited by ₹ 80,000

Answer 1

B will be debited by ₹ 80,000

Explanation:

Calculation of Gaining Ratio:

Gaining Ratio of B = `3/5-2/5=1/5`

Gaining Ratio of C = `2/5-2/5=0`

B's share of Goodwill = `4,00,000xx 1/5`

B's share of Goodwill = 80,000