A and B share profits in the ratio of 3:2. C is admitted for a 1/5 share, taken equally from A and B, and brings Rs. 50,000 as goodwill premium in cash. How much of the premium is credited to A?
Correct answer: C. Rs. 25,000
- A. Rs. 10,000
- B. Rs. 20,000
- C. Rs. 25,000
- D. Rs. 30,000
Explanation
C takes 1/10 of the total profit share from each of A and B, so both old partners sacrifice equally. Therefore, the Rs. 50,000 goodwill premium is divided equally, and A receives Rs. 25,000.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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