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Difficulty: MediumRetirement and Death of a Partner

Segun, Tari, and Danladi are partners sharing profits and losses in the ratio 5:3:25:3:2 respectively. Danladi dies on March 31, 2025. At the date of his death, Danladi's capital account balance was ₦120,000\text{₦}120,000 (credit) and his current account balance was ��15,000\text{��}15,000 (credit). The firm's goodwill was valued at ₦100,000\text{₦}100,000, and the revaluation of assets yielded a net profit of ₦30,000\text{₦}30,000. Danladi's share of profit up to the date of death was calculated as ₦12,000\text{₦}12,000, and his drawings during the period were ₦8,000\text{₦}8,000. What is the total net amount due to Danladi's estate?

Answer: 165000 ₦

Answer

The total net amount due to Danladi's estate is ₦165,000\text{₦}165,000.
The net amount payable to the deceased partner's estate is obtained by taking the capital account balance (₦120,000\text{₦}120,000) plus current account balance (₦15,000\text{₦}15,000), adding his share of goodwill (20% of ₦100,000=₦20,00020\% \text{ of } \text{₦}100,000 = \text{₦}20,000), his share of revaluation profit (20% of ₦30,000=₦6,00020\% \text{ of } \text{₦}30,000 = \text{₦}6,000), and his accrued profit to date (₦12,000\text{₦}12,000), then subtracting his drawings (₦8,000\text{₦}8,000), giving ₦165,000\text{₦}165,000.

Step-by-Step Solution

1
Determine the deceased partner's share of profits
Danladi's share = 25+3+2=210\frac{2}{5+3+2} = \frac{2}{10} or 20%20\%
Profit sharing ratio is given as 5:3:25:3:2 among Segun, Tari, and Danladi.
2
Calculate Danladi's share of goodwill and revaluation profit
Goodwill share = 20%×₦100,000=₦20,00020\% \times \text{₦}100,000 = \text{₦}20,000; Revaluation share = 20%×₦30,000=₦6,00020\% \times \text{₦}30,000 = \text{₦}6,000
The retiring/deceased partner is entitled to their proportion of accumulated goodwill and asset revaluation gains.
3
Consolidate all credits and debits to determine net executor account balance
Net balance = ₦120,000+₦15,000+₦20,000+₦6,000+₦12,000−₦8,000=₦165,000\text{₦}120,000 + \text{₦}15,000 + \text{₦}20,000 + \text{₦}6,000 + \text{₦}12,000 - \text{₦}8,000 = \text{₦}165,000
Capital, current account credit, goodwill, revaluation profit, and profit to date increase the claim of the deceased partner's estate, while drawings decrease it.

Key Concept

Settlement of Deceased Partner's Capital Account
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Topics

Retirement and Death of a Partner

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