Question

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 2018, 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:
(a) 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:

Answer 1

Calculation of Gaining Ratio

X :Y :Z=4:3:1(Old ratio)

X :Z=1:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

X's Gain=$\frac{1}{2}-\frac{4}{8}=\frac{4-4}{8}=0$

Z's Gain=$\frac{1}{2}-\frac{1}{8}=\frac{4-1}{8}=\frac{3}{8}$

X:Z=0:3

Calculation of Retiring Partner’s Share of Goodwill

Y's share of goodwill=4,00,000×$\frac{3}{8}$×$\frac{1}{2}$=Rs 75,000

Y's share of goodwill will be brought by Z only.