Practicing Success
Select the partner(s) who will compensate the deceased partner for the share of goodwill at the time of death. |
Remaining Partner(s) All Partners Sacrificing Partner(s) Gaining Partner(s) |
Gaining Partner(s) |
The correct answer is Option (4) - Gaining Partner(s). The retiring or deceased partner is entitled to his share of goodwill at the time of retirement/death because the goodwill has been earned by the firm with the efforts of all the existing partners. Hence, at the time of retirement/death of a partner, goodwill is valued as per agreement among the partners the retiring/ deceased partner compensated for his share of goodwill by continuing partners (who have gained due to the acquisition of a share of profit from the retiring/ deceased partner) in their gaining ratio. |