Question - 17

Arjun, Bhim and Nakul are partners sharing profits and losses in the ratio of 14:5:6 respectively Bhim retires and surrenders 5/25 share in favour of Arjun. The goodwill of the firm is valued at 2 years purchases of superprofits based on average profit of last three years. The profits of the last 3 years are Rs. 50,000, Rs. 55,000 and Rs. 60,000 respectively.

The normal profit of the similar firm are Rs. 30,000. Goodwill already appears in the books of the firm at Rs. 75,000 The profit for the first year after the Bhim's retirement was Rs. 1,00,000 GIve necessary journal entries to adjust goodwill and distribute profit and showing your working clearly.

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