X, Y and Z were partners sharing profits and losses in the ratio of 3:2:1. X retired and goodwill of the firm is to be valued at Rs. 12,000. What will be the treatment for goodwill... X, Y and Z were partners sharing profits and losses in the ratio of 3:2:1. X retired and goodwill of the firm is to be valued at Rs. 12,000. What will be the treatment for goodwill?
Understand the Problem
The question is asking about the treatment of goodwill when a partner (X) retires from a partnership. It involves understanding how the goodwill of the firm, valued at Rs. 12,000, will be shared among the remaining partners (Y and Z) based on their profit-sharing ratio.
Answer
Y receives Rs. 8,000, and Z receives Rs. 4,000 from the goodwill.
Answer for screen readers
Y will receive Rs. 8,000, and Z will receive Rs. 4,000.
Steps to Solve
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Identify the Profit Sharing Ratio The partners X, Y, and Z share profits and losses in the ratio of 3:2:1. When X retires, the remaining partners Y and Z will share the goodwill based on their existing profit-sharing ratio of 2:1.
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Calculate the Total Goodwill The total goodwill of the firm is valued at Rs. 12,000.
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Determine Y and Z's Share of Goodwill Next, we need to calculate the share of goodwill for Y and Z.
- Total parts in the ratio = 2 + 1 = 3
- Y's share = $(2/3) \times 12,000 = 8,000$
- Z's share = $(1/3) \times 12,000 = 4,000$
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Summary of Goodwill Distribution Thus, Y will receive Rs. 8,000 and Z will receive Rs. 4,000 as their shares of goodwill after X's retirement.
Y will receive Rs. 8,000, and Z will receive Rs. 4,000.
More Information
Goodwill is an intangible asset that represents the value of a business's reputation, customer relationships, and other non-physical factors. In partnerships, it is important to accurately distribute goodwill upon the retirement of a partner to maintain fairness among the remaining partners.
Tips
- Forgetting to use the correct profit-sharing ratio of the remaining partners for the distribution of goodwill.
- Miscalculating the shares by not properly summing the parts of the ratio.
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