Question : A, B, C and D are partners sharing profits in the ratio of 1: 2: 3: 4. D died and his share is taken up by A and B equally. Goodwill was valued at 3 year's purchase of average profits which were Rs. 20,000. General Reserve showed a balance of Rs. 65,000 at the time of D's death. Find out the amount due to him when his capital balance in the balance sheet was Rs. 1,50,000 before any adjustment. Also, calculate the new profit-sharing ratios.
Option 1: Balance of D's Executors a/c Rs 2,00,000 and New profit sharing ratio 3: 4: 3
Option 2: Balance of D's Executors account Rs 2,00,000 and new profit sharing Ratio 1:1
Option 3: Balance of D's executors account Rs 2,50,000 and NPSR 1: 2: 3
Option 4: None of the above
Correct Answer: Balance of D's Executors a/c Rs 2,00,000 and New profit sharing ratio 3: 4: 3
Solution : Answer = Balance of D's Executors a/ c Rs 2,00,000 and New profit sharing ratio 3: 4: 3
To D's Executor A/c
(Bal. Figure)
Average profit = 20,000
Goodwill = 20,000 x 3 = 60,000 Hence, the correct option is 1.
D's Share = 60000 x 4/10 = 24000
A takes = 4/10 x 1/2 = 2/10 from D
B takes = 4/10 x 1/2 = 2/10 from D
A = 1/10 + 2/10 = 3/10
B = 2/10 + 2/10 = 4/10
C = 3/10
New Profit sharing ratio = 3:4:3
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