Question : P, Q and R were partners. Their partnership deed provided that they were to share profits thus; P 26 per cent; Q 34 per cent; R 40 per cent; and that if a partner died, his capital should remain in the business for a stated period at a fixed rate of interest, but that the deceased partner’s share should be credited with an amount for Goodwill, based upon one and a half year’s average profits, for the five years prior to his death, but be subject to deduction of 5 per cent from the book debts. R died, and the profits of the firm for five years were agreed at Rs.20,000; Rs.30,000; Rs. 15,000 (loss); Rs.5,000 (loss); and Rs.45,000 respectively. Book Debts stood at Rs.90,000. Q. Total Goodwill is
Option 1: Rs 22,500
Option 2: Rs 18,000
Option 3: Rs 20,000
Option 4: Rs 14500
Correct Answer: Rs 22,500
Solution : Answer = Rs 22,500
Total profit = 20,000 + 30,000 + (-15000) + (-5000) + 45000 = 75000
Average profit = 75000/ 5 = 15000
Goodwill = 15000 x 1.5 = 22500
Total Goodwill = 22500 Hence, the correct option is 1.
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