The correct answer is: C. Both A and B
Explanation:
The profit share of the partners is the amount of profit that each partner is entitled to. The calculation of the goodwill is the amount of money that a company is worth over and above the value of its assets.
In the case where a firm has earned exceptionally high profits from a contract, which will not be renewed, this profit will not be included in the profit share of the partners or in the calculation of the goodwill. This is because the profit is not a sustainable source of income for the firm and it is not likely to be repeated in the future.
Option A: Profit share of the partners
The profit share of the partners is the amount of profit that each partner is entitled to. The profit share is usually calculated based on the partners’ capital contributions or on their share of the firm’s work.
In the case where a firm has earned exceptionally high profits from a contract, which will not be renewed, this profit will not be included in the profit share of the partners. This is because the profit is not a sustainable source of income for the firm and it is not likely to be repeated in the future.
Option B: Calculation of the goodwill
The goodwill of a company is the amount of money that a company is worth over and above the value of its assets. The goodwill is usually calculated based on the company’s future earnings potential.
In the case where a firm has earned exceptionally high profits from a contract, which will not be renewed, this profit will not be included in the calculation of the goodwill. This is because the profit is not a sustainable source of income for the firm and it is not likely to be repeated in the future.
Option C: Both A and B
The correct answer is: C. Both A and B