Question

Q. 31. A. B and C are partners sharing profits in the ratio of S:3:2. C retires and
A and B agree to share future profits in the ratio of 6:4. Goodwill is to be taken at to
year's purchase of the average profits of the last 5 years, which were 10,000
*25.000; 15,000 (loss), 36,000 and 44,000 respectively,
At the date of C's retirement, following balances appeared in the books of the
firm:
General Reserve
1.20,000
Profit & Loss Account (Dr.)
30,000
C's Capital
2.00.000
You are required to record necessary journal entries in the books of the firm and
prepare C's Capital Account on his retirement​

Answer 1

Answer:

ANSWER

Old Ratio (A, B and C) = 5:3:2

C retires from the firm

His profit share = 2/10

C's share taken by A in entirely

New Ratio = Old Ratio + Share acquired from C

A's New Share = 5/10 + 2/10 = 7/10

B's New Share = 3/10 + 0 = 3/10

New Profit (A and B) = 7:3