Question 35 Chapter 5 of +2-A
35. A and B are partners sharing profits and losses in the ratio of 3: 2. They admit C as a partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of the firm's goodwill. Goodwill of the firm has been valued at 1,00,000. Pass necessary journal entries to record this arrangement.
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr | 15,000 | |||
| To Premium for Goodwill A/c | 15,000 | ||||
| (Being C brought his share of capital and goodwill) | |||||
| premium for Goodwill A/c | Dr | 15,000 | |||
| C’s Capital A/c | Dr | 10,000 | |||
| To A’s Capital A/c | 16,667 | ||||
| To B’s Capital A/c | 8,333 | ||||
| (Being goodwill brought by C distributed among the old partners and balance amount of goodwill adjusted with C’s Capital a/c) | |||||
Old Ratio of A and B = 3:2
| C get his share from the A | = | 1 |
| 6 | ||
| = | 2 | |
| 12 |
| C get his share from the B | = | 1 |
| 12 |
| Sacrificing Ratio of X and Y | = | 2: 1 |
Firm’s Share of Goodwill = 1,00,000
| C’s Share of Goodwill | = | Firm’s Goodwill x | C’s share |
| = | 10,000 | X | 1 |
| 4 | |||
| = | 25,000 |
|
B will get a share of Goodwill |
= | C’s Goodwill X | Sacrifice share of B |
| Share of Goodwill received in cash | = | 25,000 | X | 60 |
| 100 | ||||
| = | 15,000 |
C’s Share of Goodwill = 25,000
Sacrificing Ratio of X and Y = 2:1
| A will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of A |
| = | 25,000 | X | 2 |
| 3 | |||
| = | 16,667 |
| B will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of B |
| = | 25,000 | X | 1 |
| 3 | |||
| = | 8,337 |
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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