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).
The amount that should be credited to R in respect of his share of goodwill will be
Option 1: Rs 45,000
Option 2: Rs 90,000
Option 3: Rs 40,000
Option 4: None of the above.
Correct Answer: Rs 45,000
Solution :
Answer =
Rs 45,000
Total profits of last 4 years= 1,20,000+ 60,000+ (20,000)+ 80,000= 2,40,000.
R's share of profit= 2,40,000×$\frac{3}{8}$= 90,000.
R's share of goodwill= 90,000×$\frac{1}{2}$= 45,000.
Hence, the correct option is 1.
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