Question

Meera, Varun and Tarun were partners in a firm sharing profits and losses in the ratio of 5 : 2 : 3. Meera retired, and Varun and Tarun decided to share future profits and losses equally. On Meera’s retirement, the goodwill of the firm was valued at ₹ 5,00,000. The amount that was debited to Varun’s and Tarun’s capital account for the treatment of goodwill was ______.

Options

• Varun ₹ 3,00,000, Tarun ₹ 2,00,000

• Varun ₹ 1,50,000, Tarun ₹ 1,00,000

• Varun ₹ 1,00,000, Tarun ₹ 1,50,000

• Varun ₹ 1,25,000, Tarun ₹ 1,25,000

Answer 1

Meera, Varun and Tarun were partners in a firm sharing profits and losses in the ratio of 5 : 2 : 3. Meera retired, and Varun and Tarun decided to share future profits and losses equally. On Meera’s retirement, the goodwill of the firm was valued at ₹ 5,00,000. The amount that was debited to Varun’s and Tarun’s capital accounts for the treatment of goodwill was Varun ₹ 1,50,000; Tarun ₹ 1,00,000.

Explanation:

1. Calculate Meera’s Share of Goodwill:

Meera’s Goodwill = `5,00,000 xx 5/10`

= 2,50,000

2. Calculate the Gaining Ratio:

Gaining Ratio = New Ratio − Old Ratio

Varun = `1/2 - 2/10`

= `(1 xx 5)/(2 xx 5) - 2/10`

= `5/10 - 2/10`

= `3/10`

Tarun = `1/2 - 3/10`

= `(1 xx 5)/(2 xx 5) - 3/10`

= `5/10 - 3/10`

= `2/10`

The Gaining Ratio between Varun and Tarun is 3 : 2.

3. Distribute Meera’s Goodwill in the Gaining Ratio:

Varun’s Debit = `2,50,000 xx 3/5`

= 1,50,000

Tarun’s Debit = `2,50,000 xx 2/5`

= 1,00,000