Question

A, B & C are the partners sharing profits and losses in the ratio $2:1:1$. Firm has a joint life policy of Rs$1,20,000$ and in the balance sheet it is appearing at the surrender value i.e. Rs $20,000$. On the death of A, how his JLP will be shared among the partners?

• A. $50,000:25,000:25,000$
• B. $60,000:30,000:30,000$
• C. $40,000:35,000:25,000$
• D. Whole of Rs$1,20,000$ will be paid to A.

Answer 1

Answer: (A)

$50,000:25,000:25,000$

If Joint Life Policy appears in the Balance Sheet at surrender value, then the firm will gain on the death of a partner and partners will get

policy amount - Surrender value i.e., in their profit sharing ratio

Rs. 120000 - Rs. 20000 = Rs. 100000

Distribution of JLP among the partners is :

A = 100000 * (2/4) = 50000

B = 100000 * (1/4) = 25000

C = 100000 * (1/4) = 25000