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P,Q and R were partners in a firm sharing profits in the ratio 2:2:1. the firm closes its books on 31 march every year. P died at 3 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 basis of average profits of last 4 years. the profit of last 4 years were 2007 - rs. 2,00,000 2006 - rs. 1,80,000 2005 - 2,10,000 2004 - 1,70,000(loss). pass necessary journal for the treatment of goodwill and p's share of profit on his date of death.

Q Dr. 24,000

R Dr. 12,000

To P 36,000

$\mathrm{Calculation}\mathrm{of}\mathrm{Goodwill}=90,000\times \mathrm{P}\text{'}\mathrm{s}\mathrm{share}=90,000\times \frac{2}{5}=36,000\phantom{\rule{0ex}{0ex}}\mathrm{Q}\text{'}\mathrm{s}\mathrm{share}=36,000\times \mathrm{Q}\text{'}\mathrm{s}\mathrm{Gaining}\mathrm{Share}=36,000\times \frac{2}{3}=24,000\phantom{\rule{0ex}{0ex}}\mathrm{R}\text{'}\mathrm{s}\mathrm{share}=36,000\times \mathrm{R}\text{'}\mathrm{s}\mathrm{Gaining}\mathrm{Share}=36,000\times \frac{1}{3}=12,000$

**Calculation of P's Share upto date of his death**

$\mathrm{Average}\mathrm{Profit}=\frac{2,00,000+1,80,000+2,10,000-1,70,000}{4}=1,05,000\phantom{\rule{0ex}{0ex}}\mathrm{P}\text{'}\mathrm{s}\mathrm{up}\text{-to-}\mathrm{date}\mathrm{profit}=1,05,000\times \mathrm{P}\text{'}\mathrm{s}\mathrm{profit}\mathrm{share}\times \frac{\mathrm{No}.\mathrm{of}\mathrm{months}\mathrm{he}\mathrm{remained}\mathrm{in}\mathrm{business}}{12}\phantom{\rule{0ex}{0ex}}=1,05,000\times \frac{2}{5}\times \frac{3}{12}=10,500$$\mathrm{Average}\mathrm{Profit}=\frac{2,00,000+1,80,000+2,10,000-1,70,000}{4}=1,05,000\phantom{\rule{0ex}{0ex}}\mathrm{P}\text{'}\mathrm{s}\mathrm{up}\text{-to-}\mathrm{date}\mathrm{profit}=1,05,000\times \mathrm{P}\text{'}\mathrm{s}\mathrm{profit}\mathrm{share}\times \frac{\mathrm{No}.\mathrm{of}\mathrm{months}\mathrm{he}\mathrm{remained}\mathrm{in}\mathrm{business}}{12}\phantom{\rule{0ex}{0ex}}=1,05,000\times \frac{2}{5}\times \frac{3}{12}=10,500$

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