Question : In the partnership agreement between R Sand T who were sharing profits in the ratio of 5 : 3 : 2, the goodwill was to be valued on the death of any partner on the basis of such partner’s share of 2 year’s profits calculated on the average of 5 year’s profits Immediately preceding the year of death less 10%. The firm’s profits were 2014 Rs. 10,000; 2015 Rs.30,000; 2016 Rs.43,000 and in 2017 and 2018 losses of Rs.6,000 and Rs.4,000 respectively. The deceased partner’s share of profits for the period of his life-time in the year of death was to be based on the average of the profits of the previous 3 years plus 10%.
R died on 31st August, 2018. His Capital A/c showed a credit of Rs.50,000 on 1st April, 2018 and he had drawn Rs.4,000 since that date.
Q. R’s share of Goodwill is
Option 1: Rs 13,280
Option 2: Rs 13,140
Option 3: Rs 13,000
Option 4: None of the above
Correct Answer: Rs 13,140
Solution : Answer = Rs 13,140
Total Profit of Last 5 years
= 10,000 + 30,000 + 43000 + (6000)+(4000) = 73000
Average Profit = 73000/5 = 14600
= 1460
Less 10%
= 13140
Goodwill = 13140 *2 = 26280
A's Share = 26,280* 5/10 = 13140
Hence, the correct option is 2.