Question : P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided under the partnership deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profits credited to his account during the last 4 completed years (books of accounts are closed on 31st March).
R died on 1st April 2018. The firm’s profits for the last 4 years were as follows: 2015 (Profits Rs. 1,20,000); 2016 (Profits Rs.60,000); 2017 (Losses Rs.20,000) and 2018 (Profits Rs. 80,000). Determine the amount that should be credited to R in respect of his share of goodwill.
Option 1: Rs 90,000
Option 2: Rs 30,000
Option 3: Rs 45,000
Option 4: Rs 60,000
Correct Answer: Rs 45,000
Solution : Answer = Rs 45,000
Total Profits = 1,20,000 + 60,000 + (-20,000) + 80,000
= 2,40,000
R's Share of Profit = 2,40,000 * 3/8
= 90,000
Goodwill = 90,000 * 1/2 (50%)
= 45000
Hence, the correct option is 3.
