Advertisements
Advertisements
Question
Viraj, Harsh and Akhil are partners in a firm sharing profits and losses in the ratio of 4/9 : 1/3 : 2/9. Akhil dies on 31st March, 2022. Viraj acquires 4/9 of Akhil's share and the balance is acquired by Harsh.
On the date of Akhil's death, it was decided to value the goodwill of the firm on the basis of two year's purchase of average super profit.
The average net profit made by the firm is ₹ 49,000 per annum.
The remuneration of the partners, considered as management cost, is estimated to be ₹ 9,000 per annum.
The total value of assets and liabilities of the firm is ₹ 2,20,000 and ₹ 80,000 respectively.
The normal rate of return in the industry is 15%.
You are required to calculate:
- The gaining ratio of the continuing partners.
- The value of non-purchased goodwill of the firm.
Solution
| Viraj | Harsh | Akhil | ||
| Profit Sharing ratio | `4/9` : | `1/3` : | `2/9` | = 4 : 3 : 2 |
(i) Akhil died on 31st March 2022.
Viraj's gain = `2/9 xx 4/9 = 8/81`
Harsh's gain = `2/9 - 8/81 = (18 - 8)/81 = 10/81`
Gaining ratio between Viraj and Harsh = `8/81 : 10/81 = 8 : 10 => 4 : 5`
Gaining ratio = 4 : 5
(ii) Average Net Profit = ₹ 49,000
Remuneration of Partners = ₹ 9,000
Normal Rate of Return = 15%
Actual Average Net Profit = Average Net Profit - Remuneration of Partners
= ₹ (49,000 - 9,000) = ₹ 40,000
Capital Employed = Assets - Liabilities
= 2,20,000 - 80,000
= ₹ 1,40,000
Normal Profit = `"Capital Employed" xx "Normal Rate of Return"/100`
`= 1,40,000 xx 15/100`
= ₹ 21,000
Super Profit = Actual Average Net Profit - Normal Profit
= 40,000 - 21,000
= ₹ 19,000
Goodwill = Super Profit × Number of year's purchase
= 19,000 × 2
= ₹ 38,000
APPEARS IN
RELATED QUESTIONS
Distinguish between sacrificing ratio and gaining ratio.
A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. A retires, assuming B and C will share profits in the ratio of 2 : 1. Determine the gaining ratio.
X, Y and Z are partners sharing profits in the ratio of 1/2, 3/10, and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm.
(a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 2. C retires from the business. A is acquiring 4/9 of C's share and balance is acquired by B. Calculate the new profit-sharing ratio and gaining ratio.
Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.
P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that profit-sharing ratio between Q and R will be same as existing between P and Q. Calculate New profit-sharing ratio and Gaining Ratio.
Answer the following question:
What is meant by 'Gaining Ratio' on the retirement of a partner?
Ranjana, Sadhna and Kamana are partners sharing profits in the ratio 4:3:2. Ranjana retires; Sadhna and Kamana decided to share profits in future in the ratio of 5:3. Calculate the Gaining Ratio?
Retiring partner is compensated for parting with the firm's future profits in favour of the remaining partners. The remaining partners contribute to such compensation amount in:
A , B, and C were partners sharing profits and losses in the ratio of 4: 3: 1. B retires and gives her share of profit to A for ₹ 7,200 and to C for ₹ 6,000. The gaining ratio of A and C will be ______.
