24 :- X, Y and Z were partners in a firm sharing profits in the ratio of 4:3:1. The firm closes its books on 31st March every year. On 1st February, 2025, Y died and it was decided that the new profit sharing ratio between X and Z will be equal. Partnership deed provided for the following on the death of a partner:
(i) His share of goodwill be calculated on the basis of half of the profits credited to his account during the previous four completed years. The firm’s profits for the last four years were :
(ii) His share of profit in the year of his death was to be computed on the basis of average profit of past two years.
Pass necessary journal entries relating to goodwill and profit to be transferred to Y’s capital account.
Solution :-
WORKING NOTES :
(i) Calculation of Y’s share of goodwill
Average profit = 1,50,000 + 1,00,000 + 50,000 + 1,00,000/4
= 4,00,000/4
= Rs 1,00,000
(ii) Calculation of Y’s share of profit
Average profit of last 2 years = 1,00,000 + 50,000/2
= Rs 75,000
Y’s share of profit = 75,000 x 3/8 x 10/12 = Rs 23,438
Question 1 to 5 (New Profit – Sharing Ratio and Gaining Ratio)
Question 6 to 8 (Deceased Partner’s Share of Goodwill)
Question 9 to 13 (Calculation of Profit Share of a Deceased Partner)
Question 14 to 18 (Calculation of Profit Share of a Deceased Partner)
Question 19 to 23 (Calculation of Profit Share of a Deceased Partner)
Question 24 (Deceased Partner’s Share of Goodwill and Profit)
Question 25 to 29 (Determination of Amount Payable to Executors of a Deceased Partner)
Question 30 to 33 (Determination of Amount Payable to Executors of a Deceased Partner)
Question 34 (Adjustment of Capital)
Question 35 (Section 37 of the Indian Partnership Act)