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Goodwill Valuation (Retirement)

A, B and C ...

Question

$A, B$ and $C$ are partners sharing profits and losses in the ratio of $2 : 2 : 1$ respectively. $A$ is entitled to a commission of 10% on the net profit. Net profit for the year is Rs. 1,10,000. Determine the amount of commission payable to $A$ .

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Solution

Net Profit before charging commission= 110000
Rate of commission= 10%
A's commission = [Rate/100]* Net profit
= 110000 * 10/100
= 11000

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