All questions of Unit 4: Retirement of a Partner for CA Foundation Exam

As nothing has been mentioned regarding the profit sharing ratio and partnership deed is also silent, so the profit sharing ratio is 1:1:1. 

And C decide to share future profits in the ratio of 5:3, find the new profit sharing ratio of A and C.

Initially, the profit sharing ratio of A, B, and C was 4:3:2. When B retires, his share of the goodwill will be distributed between A and C. Let's calculate the amount of goodwill distributed to A and C.

B's share of goodwill = 3/(4+3+2) * 10,800 = Rs. 3,600

Since A and C will now share in the ratio of 5:3, the total profit sharing ratio will be 5+3=8.

Let X be the new profit sharing ratio of A in the new partnership.

Therefore, C's new profit sharing ratio will be (8 - X).

A's share of goodwill = Rs. 3,600 + X/(X+(8-X)) * 7,200

C's share of goodwill = Rs. 3,600 + (8-X)/(X+(8-X)) * 7,200

According to the question, A's share of goodwill is twice that of C's share of goodwill.

Therefore, we can write the equation as:

Rs. 3,600 + X/(X+8-X) * 7,200 = 2 * [Rs. 3,600 + (8-X)/(X+8-X) * 7,200]

Simplifying the above equation, we get:

X = 6

Therefore, the new profit sharing ratio of A and C will be 6:2 or 3:1.

's capital account for the surrender value of the policy?

The surrender value of the policy will be credited to the capital account of A, B and C in their profit sharing ratio of 2:2:1. After B's retirement, the new profit sharing ratio will be 3:2 (equal sharing between A and C), so the surrender value will be credited to their capital accounts in the ratio of 3:2.

The entry in the capital accounts will be:

A's capital account: Dr. Rs. 75,000 (3/5 of surrender value)
C's capital account: Dr. Rs. 50,000 (2/5 of surrender value)
To Joint Life Policy account: Cr. Rs. 1,25,000 (total surrender value)

Answer: b) Rs. 60,000 credited to Joint Life Policy Account

Explanation:

When a partner retires or dies, the Joint Life Policy taken on the lives of the partners is surrendered and the cash received is credited to the Joint Life Policy Account. In this case, Ram is retiring and the remaining partners are continuing the business. Therefore, the Joint Life Policy will be surrendered and the cash received of Rs. 60,000 will be credited to the Joint Life Policy Account. This account will then be distributed among the remaining partners in their profit sharing ratio.

Let the ratio of the share purchased by A and C from B be x: y
Since the total capital remains intact,
(x/3)(75000) + (y/1)(50000) = 75000
25000x + 50000y = 225000
Dividing both sides of the equation by 25000, we get:
x + 2y = 9 ----(1)
Also, the new ratio between A and C is 3:1.
Let the capitals of A and C after purchasing B be 3z and z respectively.
According to the question,
(3z + x/3)(3) = 100000 --------(2)
(3z + y/1)(1) = 50000 -------(3)
Simplifying (2) and (3), we get:
9z + x = 100000
3z + y = 50000
Substituting the value of x from equation (1), we get:
9z + 3y - 2y = 100000
9z + y = 100000
y = 100000 - 9z ----(4)
Substituting the value of y from equation (4) into equation (3), we get:
3z + 100000 - 9z = 50000
6z = 50000 - 100000
6z = -50000
z = -50000/6
z = -8333.33
Since capital cannot be negative, z = 0
Therefore, the capital of A after purchasing B = 3z = 3(0) = Rs. 0
The capital of C after purchasing B = z = 0
Therefore, the capital of A and C after purchasing B is Rs. 0.

's capital accounts in their profit sharing ratio
b)Credited to X and Z's capital accounts in their new profit sharing ratio
c)Credited to Y's capital account
d)Credited to the firm's current account

Answer: b) Credited to X and Z's capital accounts in their new profit sharing ratio

Explanation:
Since Y has retired, the partnership firm is now between X and Z only. They have also decided to share profits and losses in the ratio of 2:1. Therefore, the amount of joint life policy should be transferred to their capital accounts in the new profit sharing ratio. Hence, option b) is the correct answer. Option a) is incorrect because Y is no longer a partner in the firm. Option c) is also incorrect because Y has already received his share of the partnership assets upon retirement. Option d) is incorrect because the joint life policy is a partnership asset and not a current liability of the firm.

Retirement of Partner A:

Calculation of Goodwill:
- Total Capital of the firm = Rs. 7,00,000
- Goodwill of the entire firm = Rs. 1,40,000
- Goodwill to be credited to Partners Capital Accounts in old profit sharing ratio:
- A's share = (2,00,000/7,00,000) x 1,40,000 = Rs. 40,000
- B's share = (3,00,000/7,00,000) x 1,40,000 = Rs. 60,000
- C's share = (2,00,000/7,00,000) x 1,40,000 = Rs. 40,000

Adjustment Entries:
- Credit Partners Capital Account with old profit sharing ratio for Rs. 1,40,000:
- Credit A's Capital Account with Rs. 40,000
- Credit B's Capital Account with Rs. 60,000
- Credit C's Capital Account with Rs. 40,000
- Credit As Account with Rs. 40,000 and debit B's Capital Account with Rs. 10,000 and C's Capital Account with Rs. 30,000:
- Debit B's Capital Account with Rs. 10,000
- Debit C's Capital Account with Rs. 30,000
- Credit A's Capital Account with Rs. 40,000
This adjustment ensures that A receives his share of the goodwill and B and C adjust their capital accounts accordingly based on the new profit sharing ratio.

To calculate the amount to be paid to X for his share of goodwill, we first need to determine the total profit of the firm at the time of X's retirement.

The ratio of profit sharing between X, Y, and Z is 5:3:2. Let's assume the total profit is represented by the variable 'P'.

The amount of profit allocated to X is 5/10 * P = P/2.
The amount of profit allocated to Y is 3/10 * P = 3P/10.
The amount of profit allocated to Z is 2/10 * P = P/5.

When X retires, the new profit sharing ratio between Y and Z is 1:1.

Let's assume the new equal share is 'Q'. So, Y and Z will each receive Q/2.

Since X's share of profit is P/2, we can equate it to Y and Z's new equal share:

P/2 = Q/2 + Q/2
P/2 = Q

To calculate the value of Q, we need to consider the total profit before X's retirement (P) and the value of the agreed goodwill (Rs. 1,00,000).

The total profit before X's retirement (P) is the sum of the individual profit shares:

P = P/2 + 3P/10 + P/5

To solve this equation, we multiply every term by 10 to eliminate the fractions:

10P = 5P + 6P + 2P
10P = 13P
13P - 10P = 0
3P = 0

This implies that the total profit before X's retirement is zero. However, this is not possible since there is an agreed goodwill of Rs. 1,00,000.

Therefore, there seems to be an error or missing information in the given problem statement. Please double-check the details and provide any missing information so that we can provide an accurate solution.

Understanding Joint Life Policy Treatment
In this scenario, the treatment of the Joint Life Policy (JLP) in the partners' capital accounts after B's retirement is crucial to understand.
Key Facts:
- Joint Life Policy amount: Rs. 2,50,000
- Surrender value after five years: Rs. 50,000
- Old profit-sharing ratio: 2:2:1 (A:B:C)
- New profit-sharing ratio after B's retirement: A and C share profits equally (1:1)
Why Option D is Correct:
- Nature of the JLP: The JLP is maintained at its surrender value of Rs. 50,000. This means that the policy is not encashed in full but only at its current surrender value.
- Distribution of Surrender Value: Since the policy is maintained at the surrender value, and given that it is not being realized for its full amount (Rs. 2,50,000), the partners do not receive the full benefit of the policy.
- No Immediate Treatment Required: With the JLP being kept at its surrender value, there is no need for any immediate treatment in the capital accounts of the partners. The surrender value reflects the amount that would be available, but it does not warrant actual distribution since the policy remains active.
- Future Considerations: The potential amounts related to the policy can be considered in future profit-sharing agreements or if the policy is eventually surrendered or matured.
In conclusion, since the Joint Life Policy is retained at its surrender value, there is no immediate adjustment or treatment required in the partners' capital accounts. Thus, the correct answer is option 'D': No treatment is required.

Solution:

Given, X, Y, Z are equal partners in a firm. Z retires from the firm. The new profit sharing ratio between X and Y is 1:2.

We need to find the gaining ratio.

Gaining Ratio:

The ratio in which the continuing partners (X and Y) share the profits of the partnership firm due to the retirement or death of any partner is called the gaining ratio.

Let the gaining ratio be x:y.

After Z's retirement, the new ratio of sharing profits between X and Y is 1:2. So, the total profit is divided into 3 parts, out of which Y gets 2 parts and X gets 1 part.

Therefore, the new profit sharing ratio of X and Y is:

X:Y = 1:2

Let us assume that the total profit is 3 units.

So, Y will get 2 units and X will get 1 unit.

Old Profit Sharing Ratio:

Before Z's retirement, the profit was divided equally among the three partners X, Y, and Z.

So, the old profit sharing ratio of X, Y, and Z is:

X:Y:Z = 1:1:1

Let us assume that the old profit is 3 units.

So, each partner gets 1 unit.

Calculation of Gaining Ratio:

Now, Z retires from the firm. So, the total profit is shared only between X and Y. Z will not get any share from the new profit.

The difference in the profit share of X and Y is the gain or loss for each partner.

In this case, Y gains more profit than X. So, the gaining ratio will be in favor of Y.

Let us calculate the profit gained by Y and X after Z's retirement.

Profit gained by Y:

Y's new share - Y's old share

= 2 units - 1 unit

= 1 unit

Profit gained by X:

X's new share - X's old share

= 1 unit - 1 unit

= 0 unit

Therefore, the gaining ratio of Y and X is 1:0.

Simplifying the ratio, we get:

1:0 = 4:0 (multiplying both sides by 4)

= 4:1

Hence, the gaining ratio is 4:1.

Option (c) is incorrect as it says the gaining ratio is 2:1, which is not true.

Option (a) is incorrect as it says the gaining ratio is 3:2, which is not true.

Option (b) is incorrect as it says only B gains by 1/3, which is not true.

Correct option is B Rs.8,000 and Rs.4,000.
On retirement of B, total goodwill of the firm is Rs. 30000
B's share of goodwill = Rs. 30000 * (2/5) = Rs. 12000
Contributions by A and C to compensate B will be in their gaining ratio i.e.,2 : 1
A's contribution = Rs. 12000 * (2/3) = Rs. 8000
B's contribution = Rs. 12000 * (1/3) = Rs. 4000

On C's investment of Rs. 50,000, A and B invest Rs. 1,00,000 and Rs. 75,000 respectively.

Let's calculate the ratio of their investments:

A's investment = Rs. 1,00,000
B's investment = Rs. 75,000
C's investment = Rs. 50,000

To find the ratio, we divide each investment by the smallest investment:
A's ratio = A's investment / C's investment = Rs. 1,00,000 / Rs. 50,000 = 2
B's ratio = B's investment / C's investment = Rs. 75,000 / Rs. 50,000 = 1.5
C's ratio = C's investment / C's investment = Rs. 50,000 / Rs. 50,000 = 1

So, the ratio of their investments is 2:1.5:1.

Now, let's calculate the ratio of their profits:

Let the total profit be X.

A's share of profit = (A's ratio / Total ratio) * X
= (2 / (2 + 1.5 + 1)) * X
= (2 / 4.5) * X
= 4X / 9

B's share of profit = (B's ratio / Total ratio) * X
= (1.5 / (2 + 1.5 + 1)) * X
= (1.5 / 4.5) * X
= 3X / 9

C's share of profit = (C's ratio / Total ratio) * X
= (1 / (2 + 1.5 + 1)) * X
= (1 / 4.5) * X
= 2X / 9

So, the ratio of their profits is 4X/9 : 3X/9 : 2X/9, which simplifies to 4:3:2.

To find the contribution of partners A and C to compensate B, we need to first determine the value of B's share in the partnership.

Given:
Profit-sharing ratio of A, B, and C = 2:2:1
Goodwill value = Rs. 30,000

Step 1: Calculate B's share in the partnership
Since the profit-sharing ratio of A, B, and C is 2:2:1, we can calculate B's share as follows:
B's share = (2 / (2 + 2 + 1)) * Goodwill value
B's share = (2 / 5) * Rs. 30,000
B's share = Rs. 12,000

Step 2: Determine the contribution of A and C
Since B is retiring, A and C need to compensate B for his share in the partnership. As per the profit-sharing ratio, A and C will share the remaining profits in a 2:1 ratio.

Let's assume the remaining profits after B's retirement are X.

A's share = (2 / (2 + 1)) * X
C's share = (1 / (2 + 1)) * X

Since A and C need to compensate B for Rs. 12,000, we can set up the following equation:
A's share + C's share = Rs. 12,000

(2 / 3) * X + (1 / 3) * X = Rs. 12,000
(3 / 3) * X = Rs. 12,000
X = Rs. 12,000

Step 3: Calculate the contribution of A and C
Now that we know the value of X, we can calculate the individual contributions of A and C.
A's contribution = (2 / 3) * X = (2 / 3) * Rs. 12,000 = Rs. 8,000
C's contribution = (1 / 3) * X = (1 / 3) * Rs. 12,000 = Rs. 4,000

Therefore, the contribution of A and C to compensate B is Rs. 8,000 and Rs. 4,000, respectively. Hence, the correct answer is option B.

Treatment for Goodwill:
The treatment for goodwill in this scenario would be as follows:
1. Credited to partners' capital accounts:
- Goodwill is an intangible asset that represents the reputation, customer base, and other non-physical assets of a business.
- Since A is retiring, the goodwill of the firm needs to be valued and accounted for.
- The goodwill amount of Rs. 24,000 should be credited to the remaining partners' capital accounts (B and C) in their profit-sharing ratio.
- This means that B and C will share the goodwill equally, as per their profit-sharing ratio of 2:1.
2. Credited to Revaluation Account:
- In addition to the above treatment, the goodwill amount can also be credited to the Revaluation Account.
- The Revaluation Account is used to adjust the balances of various assets, liabilities, and capital accounts when there are changes in the partnership.
- By crediting the goodwill amount to the Revaluation Account, it will be reflected in the final distribution of profits or losses among the partners.
3. Credited only to A's capital account:
- This treatment is not appropriate in this scenario because the goodwill is a joint asset of the partnership and should be shared among the remaining partners.
- Crediting only A's capital account with the full amount of Rs. 24,000 would not reflect the true nature of the partnership.
Therefore, the correct treatment for goodwill in this scenario would be option B: Credited to partners' capital accounts Rs. 24,000 in the profit-sharing ratio.

Given:
- A, B, and C are partners sharing profits and losses in the ratio of 3:2:1.
- C retires on a decided date.
- Goodwill of the firm is to be valued at Rs. 60,000.
We need to find the amount payable to the retiring partner on account of goodwill.
To calculate the amount payable to the retiring partner on account of goodwill, we can use the following formula:
Amount Payable = (Total Goodwill * Retiring Partner's Share) / Total Partners' Share
Let's calculate the amount payable to the retiring partner:
1. Calculate the total share of A, B, and C:
- Total share = 3 + 2 + 1 = 6
2. Calculate the retiring partner's share (C's share):
- C's share = 1/6 * Total Goodwill
- C's share = 1/6 * Rs. 60,000 = Rs. 10,000
Therefore, the amount payable to the retiring partner on account of goodwill is Rs. 10,000.
Hence, the correct answer is option C: Rs. 10,000.

X'gain = 4/5*1/2=2/10

y'gain =4/5*1/2=2/10

n.p.s.r= old ration +gain ratio

X's gain ration=3/10+2/10=5/10

y's gain rati = 3/10+2/10=5/10

n.p.s.r = 5:5=====>1:1

Given information:
- A, B, and C are partners in a firm sharing profits and losses in the ratio of 2:2:1.
- Capital balance of A and B is Rs. 50,000 each, while for C it is Rs. 25,000.
- B is retiring from the firm and the balance in reserve is Rs. 15,000.
- Goodwill of the firm is valued at Rs. 30,000.
- Profit on revaluation is Rs. 7,050.

To find: Amount transferred to the loan account of B.

Solution:
Step 1: Calculate the total capital of the firm before B's retirement.
- Total capital = Capital of A + Capital of B + Capital of C
- Total capital = Rs. 50,000 + Rs. 50,000 + Rs. 25,000
- Total capital = Rs. 1,25,000

Step 2: Calculate the new profit sharing ratio after B's retirement.
- A and C will continue to share profits and losses in the same ratio of 2:1.
- B's share will be transferred to his loan account.
- New profit sharing ratio = 2:1
- B's share = 2/(2+1) = 2/3
- A's share = 2/(2+1) = 2/3
- C's share = 1/(2+1) = 1/3

Step 3: Calculate the amount of goodwill to be debited/credited to partners' capital accounts.
- Goodwill = Rs. 30,000
- Goodwill to be debited/credited to A and C's capital accounts = Goodwill x (new ratio - old ratio)/total ratio
- Goodwill to be debited/credited to A and C's capital accounts = Rs. 30,000 x (2/3 - 2/5)/(2/3 + 2/3 + 1/3)
- Goodwill to be debited/credited to A and C's capital accounts = Rs. 7,200 (to be credited)

Step 4: Calculate the total revaluation profit to be distributed among partners.
- Revaluation profit = Rs. 7,050
- Revaluation profit to be distributed among A and C = Revaluation profit x (new ratio - old ratio)/total ratio
- Revaluation profit to be distributed among A and C = Rs. 7,050 x (2/3 - 2/5)/(2/3 + 2/3 + 1/3)
- Revaluation profit to be distributed among A and C = Rs. 1,710

Step 5: Prepare the retirement account of B.
- Balance in reserve = Rs. 15,000
- Share of goodwill credited to A and C = Rs. 7,200
- Share of revaluation profit distributed to A and C = Rs. 1,710
- Total amount to be transferred to B's loan account = (Capital of B + Interest on drawings + Share of revaluation loss) - (Balance in reserve + Share of goodwill credited to A and C + Share of revaluation profit distributed to A and C)
- Total amount to be transferred to B's loan account = (Rs. 50,000 + 0 + 0) - (Rs.

Joint Life Policy

A joint life policy is a type of life insurance policy that covers multiple individuals under a single policy. The policy pays out the sum assured upon the death of any one of the covered individuals. This type of policy is commonly taken by firms to provide financial protection in the event of the death of one or more partners or employees. Let's discuss the options given in the question and understand why the correct answer is option 'D'.

All the partners jointly
- This option suggests that the joint life policy is taken on the lives of all the partners of the firm.
- In this case, the policy would pay out the sum assured upon the death of any one of the partners.
- This ensures that the surviving partners have financial protection in case of the death of a partner, which can help cover any business liabilities or provide for the deceased partner's family.

All the partners severely
- This option suggests that the joint life policy is taken on the lives of all the partners severely.
- It seems that there might be a typographical error in this option, as the word 'severely' does not make sense in the given context. It is likely meant to be 'severally', which means individually or separately.
- If the policy is taken on the lives of all the partners severally, each partner would have their own policy, and the sum assured would be paid out upon their individual deaths.
- This would provide individual financial protection to each partner's family or beneficiaries.

On the life of all the partners and employees of the firm
- This option suggests that the joint life policy is taken on the lives of both the partners and employees of the firm.
- In this case, the policy would pay out the sum assured upon the death of any one of the covered individuals, whether they are partners or employees.
- This type of policy provides comprehensive coverage for all individuals associated with the firm, ensuring financial security for their families or beneficiaries.

a and b
- Option 'D' states that the correct answer is a combination of options 'a' and 'b'.
- This means that the joint life policy is taken on the lives of all the partners jointly, as well as all the partners individually (severally).
- This ensures that both the collective interests of the partnership and the individual interests of each partner are protected through the policy.

Overall, option 'D' is the correct answer as it captures the comprehensive nature of a joint life policy taken by a firm. It covers all the partners jointly and severally, providing financial protection for both the partnership and the individual partners.

Reason Behind This : When a partner will die, insurance policy will discontinue. So, firm only gets surrender value as per the rules and regulations of insurance companies in India.

Gaining Ratio, Option C

Given, A:B:C = 4:3:2 and B retires.

Step 1: Calculating B's share in the profits

Let the total profits be x.

B's share = 3/(4+3+2) * x = 3/9 * x = x/3

Step 2: Calculating the value of Goodwill

Goodwill = Rs. 10,800

Step 3: Calculating the amount to be paid to B

As per the question, A and C will share B's profits in the ratio of 5:3.

Total share of A and C = 5+3 = 8

B's share = x/3

Therefore, A's share = (5/8) * (x/3) = 5x/24

C's share = (3/8) * (x/3) = 3x/24 = x/8

Total amount to be paid to B = Goodwill + B's share in profits - A's share - C's share

= 10,800 + (x/3) - (5x/24) - (x/8)

= 10,800 + x/24

Step 4: Calculating the new profit sharing ratio

Let the new profit sharing ratio be P:Q:R.

P = A's new share in profits

Q = B's new share in profits (which is 0 as B has retired)

R = C's new share in profits

Total profit = x + 10,800 (Goodwill)

Total share of A, B and C = P + Q + R = P + R (as Q = 0)

As per the question, A:C share B's profits in the ratio of 5:3.

Therefore, A's new share = 4/9 * (x + 10,800) + 5/8 * (x/3)

C's new share = 2/9 * (x + 10,800) + 3/8 * (x/3)

Total share of A and C = P + R = A's new share + C's new share

= (4/9 * (x + 10,800) + 5/8 * (x/3)) + (2/9 * (x + 10,800) + 3/8 * (x/3))

= (8x + 77,760)/216

Therefore, the new profit sharing ratio P:Q:R = (4/9 * (x + 10,800) + 5/8 * (x/3)):(0):(2/9 * (x + 10,800) + 3/8 * (x/3))

Simplifying this, we get P:Q:R = 13:0:11

Hence, the correct answer is option A.

Plz tell me how to solve it.. 

Valuation of Goodwill on Retirement of a Partner

- Goodwill is an intangible asset that represents the value of a firm's brand name, reputation, customer base, and other such factors that contribute to its earning capacity.
- When a partner retires from a partnership firm, the goodwill of the firm needs to be revalued to account for the change in the partnership.
- The amount by which the revalued goodwill exceeds its book value is known as the 'Gaining Ratio'.
- The gaining ratio represents the new profit sharing ratio among the remaining partners.
- The retiring partner is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm.

Calculation of Credit to Retiring Partner

- In this case, the partners A, B, and C share profits equally, i.e. in the ratio of 1:1:1.
- A retires, and the goodwill appearing in the books at Rs. 3,000 is valued at Rs. 6,000.
- The gaining ratio is calculated as follows:

Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
= (B:C) - (A:B:C)
= (1:1)/(1:1:1)
= 1:1 - 1:1:1
= 0:1:1

- The retiring partner A is entitled to a share of the excess goodwill in proportion to their profit-sharing ratio in the old firm, i.e. 1/3.
- Therefore, A's credit will be calculated as follows:

Credit to Retiring Partner = Gaining Ratio x Excess Goodwill x Retiring Partner's Profit-Sharing Ratio
= 0:1:1 x (6,000 - 3,000) x 1/3
= 0 x 3,000 x 1/3
= 0

- Hence, the credit to retiring partner A is Rs. 0, which means that they are not entitled to any share of the excess goodwill.

Calculation of A's Share in Goodwill:

The goodwill appearing in the books at Rs. 3,000 is undervalued as its actual value is Rs. 6,000. Therefore, the revaluation of goodwill will increase by Rs. 3,000 (6,000 - 3,000).

As A is retiring, he is entitled to the share in the revalued goodwill. As the partners share profits equally, A's share in the revalued goodwill will be 1/3rd of Rs. 3,000 (3,000/3) which is equal to Rs. 1,000.

Therefore, A will get credit of Rs. 1,000 in his capital account for his share in the revalued goodwill.

Answer: Option (D) Rs. 1,000

Claim of the retiring partner is payable in the following form:
There are several options for the payment of the retiring partner's claim:
A: Fully in cash
- The retiring partner's claim is paid in full with cash.
- This option provides immediate liquidity to the retiring partner.
B: Fully transferred to loan account to be paid later with some interest on it
- The retiring partner's claim is transferred to a loan account.
- The payment is deferred and the retiring partner will receive the amount with interest at a later date.
- This option allows for flexibility in managing the cash flow of the partnership.
C: Partly in cash and partly as loan repayable later with agreed interest
- The retiring partner's claim is divided into two parts.
- A portion is paid in cash immediately, while the remaining amount is transferred to a loan account to be repaid later with interest.
- This option provides both immediate liquidity and the opportunity to earn interest on the remaining amount.
D: Any of the above methods
- The retiring partner's claim can be paid using any combination of the above methods.
- The specific payment method can be determined through negotiation and agreement between the retiring partner and the remaining partners.
In conclusion, the retiring partner's claim can be paid in various forms, including full cash payment, transfer to a loan account, or a combination of cash and loan repayment. The choice of payment method depends on factors such as liquidity needs, cash flow management, and agreement between the partners.

's capital account will be credited with Rs. 12,000 and B and C's capital accounts will be debited with Rs. 8,000 each in gaining/sacrificing ratio.

The correct answer is b) Adjusted through partners capital account in gaining/sacrificing ratio.

When a partner retires, the goodwill of the firm needs to be valued and distributed among the remaining partners. In this case, the total goodwill is valued at Rs. 24,000.

As per the profit sharing ratio, A, B and C are entitled to 3/6, 2/6 and 1/6 of the goodwill respectively. However, since A is retiring, only B and C will be sharing the goodwill.

The gaining/sacrificing ratio between B and C needs to be calculated. Let's assume that B is gaining and C is sacrificing. The gaining/sacrificing ratio will be 2:1 (as per the profit sharing ratio).

Now, the goodwill of Rs. 24,000 will be distributed between B and C in the gaining/sacrificing ratio of 2:1. B will be entitled to 2/3 of the goodwill (i.e. Rs. 16,000) and C will be entitled to 1/3 of the goodwill (i.e. Rs. 8,000).

To adjust this in the capital accounts of B and C, B's capital account will be credited with Rs. 16,000 and C's capital account will be debited with Rs. 8,000. This will ensure that B's capital increases and C's capital decreases in the same ratio as the gaining/sacrificing ratio.

Therefore, the correct treatment for goodwill in this case is b) Adjusted through partners capital account in gaining/sacrificing ratio.

Restructured. It may face several financial and operational challenges. However, it also presents opportunities for growth and development. The firm may need to reassess its goals and strategies, as well as its financial and operational structures. It may also need to consider new partnerships or alliances, or explore new markets and opportunities. Overall, the retirement of a partner can be a significant turning point for a firm, and it requires careful planning and management to ensure a successful transition.

Actually thr Right answer is option a) Rs 20000 and Rs 10000

Answer Explanation :
So the goodwill of retiring partner ( B ) goodwill is 30000
and the Partners would pay B the money in the following ratio

A = 30000 × 2 / 3 = 20000

C = 30000 × 1 / 3 = 10000

For verification if u add both the values of A and B that is
20000 + 10000 = 30000 it is equal to Retiring partner B goodwill amt

But if u had the values in option B) that is
8000 + 4000 = 12000 then it would not be equal to the goodwill amt of Retiring partner B

Solution:

Given: Profit sharing ratio of A, B, C = 4:3:2

Step 1: Calculate the total profit sharing ratio without B
Total profit sharing ratio without B = 4 + 2 = 6

Step 2: Find the ratio at which A & C shares profits of B
The ratio at which A & C shares profits of B = 5:3

Step 3: Calculate the total ratio of A & C
Total ratio of A & C = 5 + 3 = 8

Step 4: Calculate the new profit sharing ratio
A's share = (4/6) * 5 = 20/6
C's share = (2/6) * 3 = 6/6
New profit sharing ratio of A & C = 20/6 : 6/6 = 20:6 = 10:3

Step 5: Combine the new ratio with C's previous share
New profit sharing ratio = 10:3 + 2:6 = 10:3 + 3:6 = 30:9

Step 6: Simplify the ratio
Divide by 3 to simplify the ratio:
New profit sharing ratio = 30/3 : 9/3 = 10:3
Therefore, the new profit sharing ratio after B's retirement is 10:3, which is equivalent to 47:25 in the given options. Hence, the correct answer is option A.

Ship accounts for the surrender value of the policy?

The surrender value of the policy will be credited to the Joint Life Policy account in the partnership accounts. The entry will be:

Joint Life Policy A/c Dr. 50,000
To Cash/Bank A/c 50,000

This entry will reduce the balance of the Joint Life Policy account and increase the balance of the Cash/Bank account. The treatment of the policy premium paid and the death benefit received will depend on the terms of the policy and the agreement between the partners.

Debts and obligations incurred prior to their retirement or departure from the partnership.
b)To receive their share of the partnership's assets and profits upon their retirement or departure.
c)To transfer any rights or ownership interests they may have in the partnership to the remaining partners or new partners.
d)To comply with any legal or contractual obligations related to their retirement or departure, such as providing notice or obtaining necessary approvals.
e)To assist with the smooth transition of their responsibilities and knowledge to the remaining partners or new partners.

Understanding the Profit Sharing Ratio
A, B, and C share profits in the ratio of 2:2:1, which means:
- A's share = 2 parts
- B's share = 2 parts
- C's share = 1 part
Calculating Total Parts
The total parts in the profit sharing ratio are:
- Total = 2 + 2 + 1 = 5 parts
Goodwill Valuation
On B's retirement, the goodwill is valued at Rs. 30,000.
Calculating B's Share of Goodwill
To find B's share of goodwill:
- B's share = (B's parts/Total parts) * Goodwill
- B's share = (2/5) * 30,000 = Rs. 12,000
Compensation by A and C
A and C must compensate B for his share of goodwill. Since A and C continue in the business, they must pay B Rs. 12,000.
Calculating A and C's Contributions
They will contribute to B's compensation in their profit-sharing ratio:
- Contribution of A = (A's parts/Remaining parts) * B's share
- Contribution of C = (C's parts/Remaining parts) * B's share
Since A and C are now sharing the total of 3 parts (2 for A and 1 for C):
- Contribution of A = (2/3) * 12,000 = Rs. 8,000
- Contribution of C = (1/3) * 12,000 = Rs. 4,000
Conclusion
Thus, the contributions of A and C to compensate B are:
- A: Rs. 8,000
- C: Rs. 4,000
This confirms that the correct answer is option 'B'.

Liability of retiring or outgoing partner:

When a partner retires or leaves the firm, it is important to understand the extent of their liability for the firm's obligations. The correct answer is option 'C' - the retiring or outgoing partner is liable for obligations incurred before his retirement.

Explanation:

Retirement or outgoing of a partner from a partnership firm can affect the liability of the partner for the firm's obligations. Here are some key points to understand the liability of a retiring or outgoing partner:

Liability for past obligations: A retiring or outgoing partner is liable for obligations incurred before his retirement. This means that if the firm has any pending liabilities or debts from before the partner's retirement, the partner will be held responsible for their share of the liability.

Liability for future obligations: A retiring or outgoing partner is not liable for any liabilities of the firm that arise after their retirement. This means that any debts or obligations that the firm incurs after the partner's retirement will not be the responsibility of the partner.

Exceptions to liability for past obligations: There are some exceptions to the liability of a retiring or outgoing partner for past obligations. For example, if the retiring partner has guaranteed any specific debts of the firm, they will continue to be liable for those debts even after their retirement.

Consent for obligations: A retiring or outgoing partner is liable for obligations incurred with their consent only. This means that if the firm incurs any debt or obligation without the partner's consent, the partner will not be held liable for it.

Conclusion:

In summary, a retiring or outgoing partner is liable for obligations incurred before their retirement, but not for any obligations that arise after their retirement. However, there are some exceptions to this rule, and the partner may also be held liable for specific debts that they have guaranteed, even after their retirement.

Please provide me with more details or specific information about the type of accounts or institutions they hold their balances in so I can assist you better.

Explanation:

When an outgoing partner is compensated for parting with the firm's future profits, the remaining partners contribute to this compensation amount in a ratio known as the gaining ratio. The gaining ratio determines how the remaining partners will share the profits that were previously allocated to the outgoing partner.

Gaining Ratio:
The gaining ratio is the ratio in which the remaining partners acquire the share of the outgoing partner. It is calculated by taking into consideration the new profit-sharing ratio of the partners after the retirement or withdrawal of the outgoing partner. The gaining ratio represents the increase in the profit-sharing ratio of each remaining partner.

Calculation of the Gaining Ratio:
To calculate the gaining ratio, we need to determine the new profit-sharing ratio of the remaining partners after the retirement or withdrawal of the outgoing partner. This can be done by adjusting the profit-sharing ratio of the partners based on the agreed terms.

For example, let's say there are three partners in a firm: A, B, and C. The profit-sharing ratio before the retirement of partner A is 2:2:1. After the retirement of partner A, the remaining partners, B and C, agree to a new profit-sharing ratio of 3:2.

In this case, the gaining ratio for partner B would be 1/3 (increase in profit-sharing ratio from 2/5 to 3/5) and the gaining ratio for partner C would be 1/1 (increase in profit-sharing ratio from 1/5 to 2/5). The gaining ratio is always expressed in terms of the total gain of each partner.

Importance of Gaining Ratio:
The gaining ratio is important as it determines how the remaining partners will share the profits that were previously allocated to the outgoing partner. It ensures a fair distribution of profits among the remaining partners based on their increased share in the firm.

Conclusion:
In conclusion, when an outgoing partner is compensated for parting with the firm's future profits, the remaining partners contribute to this compensation amount in the gaining ratio. The gaining ratio represents the increase in the profit-sharing ratio of each remaining partner and ensures a fair distribution of profits among them.

Given:
- Partners: P, Q, and R
- Profit and loss sharing ratio: 2:2:1
- Balance of capital on 1st April 2011: Rs. 75,000, Rs. 50,000, and Rs. 25,000 for P, Q, and R respectively
- Q retires on 31st March 2012
- Balance in the reserve account on 31st March 2012: Rs. 12,000
- Goodwill value: Rs. 30,000
- Profit on revaluation: Rs. 10,000

To find:
Amount transferred to the loan account of Q

Solution:

Step 1: Calculate the new profit sharing ratio:
- Partners P and R will continue as partners, and Q will retire.
- The new profit sharing ratio will be 2:1 between P and R.
- P's share = 2/(2+1) = 2/3
- R's share = 1/(2+1) = 1/3

Step 2: Calculate the total capital on 31st March 2012:
- P's capital = Rs. 75,000
- Q's capital = Rs. 50,000
- R's capital = Rs. 25,000
- Total capital = Rs. 75,000 + Rs. 50,000 + Rs. 25,000 = Rs. 1,50,000

Step 3: Calculate Q's share in the total capital:
- Q's share = (Q's capital / Total capital) * 100
- Q's share = (Rs. 50,000 / Rs. 1,50,000) * 100
- Q's share = 33.33%

Step 4: Calculate Q's share in the reserve account:
- Q's share in the reserve account = (Q's share * Balance in reserve account) / 100
- Q's share in the reserve account = (33.33% * Rs. 12,000) / 100
- Q's share in the reserve account = Rs. 3,999.60

Step 5: Calculate Q's share in goodwill and profit on revaluation:
- Q's share in goodwill = (Q's share * Goodwill value) / 100
- Q's share in goodwill = (33.33% * Rs. 30,000) / 100
- Q's share in goodwill = Rs. 9,999.90

- Q's share in profit on revaluation = (Q's share * Profit on revaluation) / 100
- Q's share in profit on revaluation = (33.33% * Rs. 10,000) / 100
- Q's share in profit on revaluation = Rs. 3,333.30

Step 6: Calculate the total amount to be transferred to Q's loan account:
- Total amount = Q's share in the reserve account + Q's share in goodwill + Q's share in profit on revaluation
- Total amount = Rs. 3,999.60 + Rs. 9,999.

X new ratio =3/10+4/20( gaining ratio of x)
=10/20
z new ratio =3/10+4/20(gaining ratio of z on y retirement)
=10/20
so new ratio of x and z =10/20:10/20=1:1

A's capital account

The balance in the Joint Life Policy account after the retirement of partner A will be credited to partner A's capital account. This is because partner A is entitled to the JLP amount as per the partnership agreement. The JLP amount was appearing in the balance sheet at Rs. 10,000, but it was realized for Rs. 7,500. Therefore, the difference of Rs. 2,500 will be debited to the JLP account and credited to partner A's capital account.

The journal entry for the same will be:

JLP account Dr. Rs. 2,500
To Partner A's capital account Rs. 2,500

Given information:
- A, B, and C are partners in a firm sharing profits and losses in the ratio of 2:2:1.
- The capital balances of A, B, and C are Rs. 50,000, Rs. 50,000, and Rs. 25,000 respectively.
- B declared retirement from the firm on 1st April 2008.
- Balance in reserve on the date was Rs. 15,000.
- Goodwill of the firm was valued at Rs. 30,000.
- Profit on revaluation was Rs. 7,050.

Calculations:
1. Calculate the total capital of the firm:
Total capital = Capital of A + Capital of B + Capital of C
= Rs. 50,000 + Rs. 50,000 + Rs. 25,000
= Rs. 1,25,000

2. Calculate the new profit sharing ratio after B's retirement:
A's share = 2/5 x 3/4 = 3/10
C's share = 1/5 x 3/4 = 3/20

3. Calculate the new capital of the firm after B's retirement:
New capital = Total capital - B's capital
= Rs. 1,25,000 - Rs. 50,000
= Rs. 75,000

4. Calculate C's new capital:
C's new capital = C's old capital + C's share in goodwill
= Rs. 25,000 + (3/20 x Rs. 30,000)
= Rs. 25,000 + Rs. 4,500
= Rs. 29,500

5. Calculate the gain on retirement of B:
Gain on retirement = New capital - Old capital
= Rs. 75,000 - Rs. 50,000
= Rs. 25,000

6. Calculate the share of goodwill:
Share of goodwill = Gain on retirement - Profit on revaluation
= Rs. 25,000 - Rs. 7,050
= Rs. 17,950

7. Calculate the amount to be transferred to B's loan account:
Amount to be transferred = B's capital - B's share of goodwill - Share of reserve
= Rs. 50,000 - Rs. 17,950 - Rs. 15,000
= Rs. 17,050

Conclusion:
The amount to be transferred to B's loan account is Rs. 17,050.

Calculation of Balances of Partners Capital Accounts

Retirement of Partner A

- A's Capital Account balance = Rs. 2,00,000
- A's share in JLP Reserve and JLP = Rs. 80,000
- Total amount due to A = Rs. 2,80,000

Distribution of A's share

- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year

Revaluation Loss

- Revaluation Loss = Rs. 10,000

Valuation of Goodwill

- Goodwill of the entire firm = Rs. 1,40,000

Surrender of Joint Life Policy

- Cash obtained from the surrender of the Joint Life Policy = Rs. 80,000

New Profit Sharing Ratio

- B and C share the future profits equally

Total Capital of the Firm

- The total capital of the firm is to be the same as before retirement

Calculation of New Capital Balances

Step 1: Calculation of B and C's Capital Account Balances

- B's Capital Account balance = Rs. 3,00,000
- C's Capital Account balance = Rs. 2,00,000
- B and C's share in JLP Reserve and JLP = Rs. 80,000
- Total Capital of the firm before A's retirement = Rs. 7,00,000

The new profit-sharing ratio is 1:1. Therefore, the new capital balance of B and C will be the same.

- New Capital of B and C = (Total Capital of the firm before A's retirement + A's share - Revaluation Loss - Goodwill) / 2
- New Capital of B and C = (Rs. 7,00,000 + Rs. 1,40,000 - Rs. 10,000 - Rs. 1,40,000) / 2
- New Capital of B and C = Rs. 3,50,000

Therefore, the new Capital Account balance of B and C is Rs. 3,50,000 each.

Step 2: Payment of A's Share

- 50% of A's share = Rs. 1,40,000
- Remaining 50% of A's share to be paid within one year

Therefore, the Capital Account balance of A will be Rs. 1,40,000 immediately after retirement, and the remaining Rs. 1,40,000 will be paid within one year.

Final Capital Account Balances

- A's Capital Account balance = Rs. 1,40,000 immediately after retirement, and Rs. 1,40,000 to be paid within one year
- B's Capital Account balance = Rs. 3,50,000
- C's Capital Account balance = Rs. 3,50,000

Hence, the correct answer is option 'A' - Rs. 3,50,000 each.

Treatment for Joint Life Policy

The joint life policy of the partners was surrendered and cash of Rs. 60,000 was obtained. The treatment for this is as follows:

- Option a: Rs. 60,000 credited to Revaluation Account
- Option b: Rs. 60,000 credited to Joint Life Policy Account

Out of these two options, the correct answer is option 'B', i.e., Rs. 60,000 credited to Joint Life Policy Account. This is because the Joint Life Policy Account is a nominal account and represents an expense. When the policy is surrendered and cash is obtained, it is treated as a realization of the expense. Hence, the amount received should be credited to the Joint Life Policy Account.

It is important to note that the Revaluation Account is a nominal account that is used to adjust the capital accounts of the partners in case of any revaluation of assets and liabilities. Since there is no revaluation involved in this transaction, option 'A' is not the correct treatment.

Conclusion

In conclusion, when a joint life policy of the partners is surrendered and cash is obtained, it should be credited to the Joint Life Policy Account as it represents the realization of an expense. The Revaluation Account should only be used in case of any revaluation of assets and liabilities.

The amount of JLP (Joint Loss Payment) that will be credited to the partner depends on the partnership agreement and the terms outlined in it. Typically, the JLP is used to settle any outstanding liabilities or losses of the partnership.

If the firm is dissolved due to the retirement of one partner, the JLP would be used to settle any remaining debts or obligations. After all liabilities are settled, any remaining JLP would be distributed among the partners according to their profit-sharing ratios or as specified in the partnership agreement.

The specific amount of JLP credited to the partner would depend on their share of the partnership profits and the amount of JLP available after settling liabilities.

Given:
Capital of A = Rs. 1,00,000
Capital of B = Rs. 75,000
Capital of C = Rs. 50,000
Profit sharing ratio = 3:2:1
B retires and his share is purchased by A and C, keeping the total capital intact.

Step 1: Find the total profit made by the company
Total profit = Profit of A + Profit of B + Profit of C
Let the profit be x
According to the given ratio,
3/6 of the profit = Profit of A
2/6 of the profit = Profit of B
1/6 of the profit = Profit of C

Therefore,
Profit of A = 3x/6 = x/2
Profit of B = 2x/6 = x/3
Profit of C = x/6

Step 2: Find the share of B
B's share in the profit = Profit of B
= x/3

Step 3: Find the new ratio between A and C
After B's share is purchased, the new ratio between A and C is 3:1
Let the share of B be y
Therefore, the new total capital = Capital of A + Capital of B - y + Capital of C - y
= Rs. 1,00,000 + Rs. 50,000 - y + Rs. 50,000 - y
= Rs. 1,50,000 - 2y

Step 4: Find the new capital of A and C
Let the new capital of A be p and the new capital of C be q
According to the new ratio,
p/q = 3/1
p = 3q

Also, the new total capital = p + B's share + q
Rs. 1,50,000 - 2y = 3q + y + q
Rs. 1,50,000 - 2y = 4q + y

Substituting p = 3q in the above equation,
Rs. 1,50,000 - 2y = 4p/3 + y
3(Rs. 1,50,000 - 2y) = 4p + 3y
4p = 3(Rs. 1,50,000 - 2y) - 3y
p = 3/4(Rs. 1,50,000 - 2y) - 3/4y

Substituting p = 3q in the above equation,
3q = 3/4(Rs. 1,50,000 - 2y) - 3/4y
4q = Rs. 2,00,000 - 8y/3
q = (Rs. 2,00,000 - 8y/3)/4

Substituting q in the equation p = 3q,
p = 3(Rs. 2,00,000 - 8y/3)/12
p = (Rs. 1,50,000 - 2y)/2

Therefore, the new capital of A is (Rs. 1,50,000 - 2y)/2 and the new capital of C is (Rs. 2,00,000 - 8y/

Explanation:
When a partner retires from a firm, the firm may have taken a Joint Life Policy for each partner. This policy is typically an insurance policy that covers the lives of multiple partners in the firm. Upon retirement of a partner, the firm receives a certain amount from the insurance company.
The correct answer is option D: Surrender Value for all the partners.
Here is a detailed explanation:
Policy Amount:
- The policy amount refers to the total sum assured by the insurance company in case of the death of any of the insured partners.
- It is not applicable in the context of retirement of a partner.
Surrender Value:
- Surrender value is the amount that the insurance company pays to the policyholder if they decide to terminate the policy before its maturity date.
- It is not directly related to the retirement of a partner.
Policy Value for the retiring partner and Surrender Value for the rest:
- This option suggests that the retiring partner receives the policy value, while the remaining partners receive the surrender value.
- However, in reality, the firm receives a single payout from the insurance company, which is the surrender value for all the partners collectively.
Surrender Value for all the partners:
- When a partner retires, the firm receives the surrender value from the insurance company.
- This surrender value is calculated based on the premiums paid and the policy terms.
- The surrender value is then distributed among all the partners, including the retiring partner, according to the partnership agreement.
In conclusion, when a partner retires, the firm receives the surrender value from the insurance company, which is then distributed among all the partners, including the retiring partner. Option D is the correct answer.

There are several ways in which an outgoing partner may be compensated for parting with a firm. Here are a few possible scenarios:

1. Buyout agreement: The firm may enter into a buyout agreement with the outgoing partner, whereby the partner receives a lump sum payment in exchange for relinquishing their ownership interest in the firm. This payment is typically based on the partner's share of the firm's net assets or a predetermined formula.

2. Profit-sharing arrangement: If the firm has a profit-sharing system in place, the outgoing partner may be entitled to a share of the firm's profits up until the date of their departure. This can be calculated based on the partner's ownership percentage or a specific formula outlined in the partnership agreement.

3. Deferred payments: In some cases, the compensation for the outgoing partner may be structured as a series of deferred payments over a specified period of time. This allows the firm to distribute the financial impact of the buyout over several years while providing the outgoing partner with a steady stream of income.

4. Non-compete agreement: As part of the compensation package, the firm may require the outgoing partner to sign a non-compete agreement, which restricts them from starting or joining a competing business for a certain period of time. In exchange for agreeing to this restriction, the partner may receive additional compensation.

It's important to note that the specific compensation arrangement will depend on the terms outlined in the partnership agreement and any negotiations between the firm and the outgoing partner.

To find the balance of Partner A, we need to calculate the following:

1. Capital balance after A's retirement:
Total capital of the firm before retirement = A's capital + B's capital + C's capital + JLP Reserve and JLP
= Rs. 2,00,000 + Rs. 3,00,000 + Rs. 2,00,000 + Rs. 80,000
= Rs. 7,80,000

2. A's capital after retirement:
A's capital after retirement = A's capital - Amount due to A settled on retirement
= Rs. 2,00,000 - 50% of Rs. 2,00,000
= Rs. 1,00,000

3. B and C's capital after A's retirement:
B and C's capital after A's retirement = Total capital of the firm before retirement - A's capital after retirement
= Rs. 7,80,000 - Rs. 1,00,000
= Rs. 6,80,000

4. New capital ratio of B and C:
B and C's new capital ratio = B's capital after retirement : C's capital after retirement
= Rs. 6,80,000 : Rs. 6,80,000
= 1:1

5. Amount due to A after retirement:
Amount due to A after retirement = Amount due to A settled on retirement - Cash obtained from Joint Life Policy
= 50% of Rs. 2,00,000 - Rs. 80,000
= Rs. 1,00,000 - Rs. 80,000
= Rs. 20,000

Now, to calculate the balance of Partner A, we need to consider the revaluation loss and goodwill:

6. Revaluation loss to be shared by B and C:
Revaluation loss to be shared by B and C = Revaluation loss - Amount due to A after retirement
= Rs. 10,000 - Rs. 20,000
= -Rs. 10,000 (negative sign indicates that this loss is to be borne by A)

7. New capital balance of B and C:
B's new capital balance = B's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000

C's new capital balance = C's capital after retirement - Revaluation loss to be shared by B and C
= Rs. 6,80,000 - (-Rs. 10,000)
= Rs. 6,90,000

8. Balance of Partner A:
Balance of Partner A = A's capital after retirement + Amount due to A after retirement
= Rs. 1,00,000 + Rs. 20,000
= Rs. 1,20,000

Therefore, the balance of Partner A is Rs. 1,20,000.

's capital accounts in their profit sharing ratio
b) Credited to Y's capital account
c) Credited to X and Z's capital accounts in their new profit sharing ratio
d) Debited to the firm's profit and loss account

The correct answer is c) Credited to X and Z's capital accounts in their new profit sharing ratio.

When Y retired, the partnership was dissolved and a new partnership was formed between X and Z in a new profit sharing ratio of 2:1. As per the dissolution of the old partnership, the joint life policy will be surrendered and the surrender value will be credited to X and Z's capital accounts in their new profit sharing ratio. This is because the policy was taken for the benefit of the partnership and not for any individual partner. The premium paid for the policy was treated as an expense of the firm and not as a personal expense of any partner. Therefore, the surrender value of the policy will be distributed among the remaining partners in their new profit sharing ratio.