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Difficulty: EasyRetirement and Death of a Partner

Chidi, Ngozi, and Ibrahim are partners sharing profits and losses in the ratio 2:2:12:2:1 respectively. Upon Chidi's retirement, the firm's assets and liabilities are revalued, resulting in a net revaluation profit of ₦15,000\text{₦}15,000. What amount in Naira (₦\text{₦}) will be credited to Chidi's capital account as his share of the revaluation profit?

Answer: 6000 ₦

Answer

The amount credited to Chidi's capital account as his share of the revaluation profit is ₦6,000.
Upon a partner's retirement, any gain on the revaluation of assets and liabilities is credited to all existing partners in their old profit-sharing ratio (2:2:12:2:1). Chidi's share is calculated as 25×₦15,000=₦6,000\frac{2}{5} \times \text{₦}15,000 = \text{₦}6,000.

Step-by-Step Solution

1
Calculate total shares in the profit-sharing ratio
2 + 2 + 1 = 5 total shares
To determine the proportion of profits and losses assigned to each partner.
2
Calculate Chidi's share of the revaluation profit
(2 / 5) * ₦15,000 = ₦6,000
The retiring partner is entitled to their share of revaluation profit calculated using the old profit-sharing ratio prior to retirement.

Key Concept

Distribution of Revaluation Profit on Partner Retirement
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Topics

Retirement and Death of a Partner

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