Question

Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2 : 1. The firm closes its books on 31st March every year. On 30th September, 2014 Momita died. According to the provisions of Partnership Deed the legal representatives of a deceased partner are entitled for the following in the event of his/her death:
(a) Capital as per the last Balance Sheet.
(b) Interest on capital at 6% per annum till the date of her death.
(c) Her share of profit to the date of death calculated on the basis of average profit of last four years.
(d) Her share of goodwill to be determined on the basis of three years purchase of the average profit of last four years. The profits of last four years were:
The balance in Momita’s Capital Account on 13st March, 2014 was ₹ 60,000 and she had withdrawn ₹ 10,000 till date of her death. Interest on her drawings was ₹ 300.
Prepare Momita’s Capital Account to be presented to her executors.

Answer 1

Explanation:

Working Notes:

1. Calculation of Interest on Momita's Capital

Interest on Capital (6 Months) $=60,000 \times \frac{6}{100} \times \frac{6}{12}= 1,800$.

2. Calculation of Momita's share in Profits

Average Profit = $\frac{\text { Profit for last } 3 \text { years }}{3}$.

Average profit = $\frac{30,000+50,000+60,000+40,000}{4}=\frac{1,80,000}{4}=45,000$.

Momita's profit = $45,000 \times \frac{1}{5} \times \frac{6}{12}=4,500$.

3. Adjustment of Goodwill

Average Profit =45,000.$Goodwill = Average Profit \times Number of years' purchase \\\\Goodwill =45,000 \times 3=\mathrm{Rs} .1,35,000$

Momita'sshare of goodwill is to be distributed between Vikas and Gagan in their = 1 : 1.

$\begin{aligned}&\text { Vikas's }=27,000 \times \frac{1}{2}=13,500\\\\\end{aligned}$

$&\text { Gagan's }=27,000 \times \frac{1}{2}=13,500$

Note: Since, here no information is given regarding the share acquired by Vikas and Gagan.

Thus, the goodwill distributed between new profit sharing ratio =2: 2 or 1: 1.