Question 14 of 38advanced🔧 ApplyMCQ1 mark

Chaman, Raman and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires, the new profit sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at Rs. 1,00,000 Raman’s share of goodwill will be adjusted

Exercise: Test your Understanding – II | Q: 3 | (Page 13)
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Explanation

Option (C) is the correct answer. Raman's share of goodwill is calculated as Rs. 30,000 (3/10 of Rs. 1,00,000). According to the treatment of goodwill on retirement, the remaining partners compensate the retiring partner in their gaining ratio. By comparing the new profit-sharing ratio (1:1) with the old ratio (5:3:2), we determine that Chaman has not gained (1/2 - 5/10 = 0), while Suman has gained (1/2 - 2/10 = 3/10). Since Suman is the only partner who has gained, Suman's Capital Account must be debited with the entire amount of Rs. 30,000 to adjust Raman's share of goodwill.

Solution Steps

  1. Step 1: Calculate Raman's share of goodwill. Raman's Share = 3/10. Goodwill Value = Rs. 1,00,000. Raman's Share of Goodwill = 1,00,000 × (3/10) = Rs. 30,000.

  2. Step 2: Calculate the gaining ratio for the remaining partners (Chaman and Suman). Gain = New Share - Old Share.

  3. Step 3: Determine Chaman's gain. New Share = 1/2. Old Share = 5/10. Gain = 1/2 - 5/10 = 0.

  4. Step 4: Determine Suman's gain. New Share = 1/2. Old Share = 2/10. Gain = 1/2 - 2/10 = 5/10 - 2/10 = 3/10.

  5. Step 5: Adjust the goodwill. Since only Suman has gained, Suman's Capital Account is debited by Rs. 30,000 and Raman's Capital Account is credited. This matches Option (C).

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