question_answer

R, Q and R were partners in a firm sharing profit in 2 : 2 : 1 ratio. The firm closes its books on 31st March every year. P died three months after the last accounts were prepared. On that date, the goodwill of the firm was valued at Rs. 90,000. On the death of a partner, his share of profit in the year of death was to be calculated on the basis of the average profit of the last four years. The profits of last four years were:

I. Rs. 2,00,000

II. Rs. 1,80,000

III. Rs. 2,10,000

IV. Rs. 1,70,000 (Loss)

Pass the necessary journal entries to adjust P?s Share of goodwill and Profit.

Answer:

P's share of goodwill = Rs. 36,000 P's share of profit = Rs. 10,500