Analyse the case given below and answer the questions that follow:

Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5:3:2. Goodwill appeared in their books at the value 60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2:3.

In which ratio does existing goodwill distributed between partners?

5:3:2

The correct answer is option 1- 5:3:2

Existing goodwill is written off in the old ratio between all the partners. Old ratio is 5:3:2. So, existing goodwill is distributed in this ratio.