Multiple Choice Questions on Deceased partners share of goodwill will be ........ for Common University Entrance Test (CUET) Preparation

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Multiple Choice Questions

Deceased partners share of goodwill will be ........

Accountancy (CUET) Death a Partner
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    A,B and C were partners in a firm sharing profits in the ratio of 5:3:2. On 31st March, 2023 their balance sheet was as under.

    Liabilities

    Amount

    Assets

    Amount

    Sundry Creditors

    Reserves

    Capital A/cs:

            A                            30,000

            B                            20,000

            C                            20,000

    10,000

    5,000

    70,000

    Plant & Machinery

    Stock

    Debtors

    Cash in hand

    50,000

    20,000

    10,000

    5,000
     

     

    A died on 1st October, 2023. It was agreed between his executors and the remaining partners that:

    1. Goodwill to be valued at 2 years purchase of the average profits of the previous 4 years. Which were 2020: Rs15,000; Rs 2021 : Rs 15,000; 2022 : Rs 20,000 and 2023 : Rs 20,000.
    2. Profit for the year 2023-2024 be taken as having accrued at the same rate as that the previous year.
    3. Interest on capital be provided at 10% per annum.

    Deceased partners share of goodwill will be

    35,000                         

    Incorrect Answer

    60,000                     

    Incorrect Answer

              17,500                  

    Correct Answer

    30,000

    Incorrect Answer
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    Explanation:

    - The average profit over four years is Rs 17,500.

    - Goodwill for the firm is calculated at 2 years' purchase: \(17,500 \times 2 = 35,000\).

    - A's share of the goodwill is based on his profit-sharing ratio of 5/10.

    - Share of goodwill for A: \(35,000 \times \frac{5}{10} = 17,500\).

    Option:3, 17,500 is correct.

    ""

    By: Ankur sharma
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