Comprehension Passage
R, S, and M were carrying on business in partnership sharing profits in the ratio 3:2:1, respectively. On March 31, 2017, the Balance Sheet of the firm stood as follows:
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs.) |
|---|---|
| Sundry Creditors | 16,000 |
| Capitals: | |
| R | 20,000 |
| S | 7,500 |
| M | 12,500 |
| Total | 56,000 |
| Assets | Amount (Rs.) |
|---|---|
| Building | 23,000 |
| Debtors | 7,000 |
| Stock | 12,000 |
| Patents | 8,000 |
| Bank | 6,000 |
| Total | 56,000 |
Shyam retired on the above mentioned date on the following terms:
(a) Buildings to be appreciated by Rs. 8,800.
(b) Provision for doubtful debts to be made @ 5% on debtors.
(c) Goodwill of the firm to be valued at Rs. 9,000.
(d) Rs. 5,000 to be paid to S immediately and the balance due to him to be treated as a loan carrying interest @ 6% per annum.
Given that the goodwill of the firm was valued at Rs. 9,000 upon Shyam's retirement, which of the following is the most appropriate action regarding the goodwill during the retirement process?
1
Goodwill is written off equally among the partners
2
Goodwill is recorded as a liability in the books
3
The value of goodwill is distributed to the partners based on their profit-sharing ratio
4
The value of goodwill is adjusted against the capital accounts of the partners