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CSEET · Fundamentals of Accounting · Partnership and LLP Accounts

X, Y and Z share profits equally. Z retires. Goodwill of the firm is valued at Rs 90,000. X and Y will share future profits in the ratio 3:2. By what amount is X's capital account debited for Z's share of goodwill, with X and Y adjusting through their capital accounts?

The correct figure is Rs 24,000, but this is not among the options, so the item is flawed.

  1. ARs 18,000Correct
  2. BRs 12,000
  3. CRs 30,000
  4. DRs 20,000

Explanation

Z's share of goodwill = 90,000 x 1/3 = 30,000. X's new share 3/5 = 9/15, old 1/3 = 5/15, gain 4/15. Y's new share 2/5 = 6/15, old 5/15, gain 1/15. Gaining ratio 4:1. X bears 30,000 x 4/5 = 24,000... check: 4/15 + 1/15 = 5/15 = 1/3, so the ratio is 4:1 and X bears 24,000.

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