Read the following passage and answer the following question.
A, B & C are partners sharing profits in proportion to their capital. A retired from the firm on 1st April 2021 and the remaining partners decided to carry on the partnership with a profit-sharing ratio of 4:3. At the time of retirement, their capital accounts show balance- A- ₹2,00,000, B- ₹3,00,000, and C ₹2,00,000. The assets and liabilities of the partnership firm are as follows-
Creditors- ₹50,000
General reserve- ₹35,000
Workmen Compensation fund ₹15,000
Cash balance- ₹1,00,000
Stock- ₹1,00,000
Machinery- ₹3,00,000
Land- ₹2,00,000
Debtors after provision for doubtful debts (10,000)= ₹1,00,000
Goodwill of the firm was valued at ₹1,40,000. What is the share of A's goodwill?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹40,000.
Goodwill= ₹1,40,000
Profit sharing ratio = 2,00,000 : 3,00,000 : 2,00,000
= 2:3:2
A's share = 1,40,000 x 2/7
= ₹40,000