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CMA Intermediate · Financial Accounting · Death of Partner

Asha, Bina and Chitra share profits equally. Asha died on 31 December. Her capital on 1 April was Rs 2,00,000 and her share of general reserve is Rs 30,000. Goodwill of the firm is valued at Rs 90,000 (no goodwill in books). Drawings up to the date of death were Rs 20,000. Interest on capital and profit up to the date of death are ignored. What amount is transferred to Asha's Executors' account?

The executors' account is credited with Rs 2,40,000. It is the capital of Rs 2,00,000 plus Rs 30,000 reserve share plus Rs 30,000 goodwill share, less Rs 20,000 drawings. Each partner holds one third, so reserve and goodwill are credited in that proportion.

  1. ARs 2,40,000Correct
  2. BRs 2,60,000
  3. CRs 2,30,000
  4. DRs 2,10,000

Explanation

Capital 2,00,000 + reserve share 30,000 + goodwill share 30,000 (90,000/3) - drawings 20,000 = 2,40,000. Rs 2,60,000 ignores drawings. Rs 2,30,000 omits goodwill share, and Rs 2,10,000 omits both the goodwill share and the reserve share's effect incorrectly.

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