Question 13 Chapter 6 of +2-A
Table of Contents
13. L, M, and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at 72,000. Calculate M’s share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.
The solution of Question 13 Chapter 6 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| L’s Capital A/c | Dr | 13,000 | |||
| O’s Capital A/c | Dr | 11,000 | |||
| To M’s Capital A/c | 24,000 | ||||
| (Being share of M’s goodwill adjusted) | |||||
Working Note: –
Old Ratio of L, M, and O = 4: 3: 2
M retires from the firm
New Ratio of L, and O = 5 : 3
Calculation of Gaining Ratio: –
Gaining Ratio = New Ratio – Old Ratio
| L’s Gaining Share | = | 5 | – | 4 |
| 8 | 9 | |||
| = | 45 | – | 32 | |
| 72 | ||||
| = | 13 | |||
| 72 | ||||
| O’s Gaining Share | = | 3 | – | 2 |
| 8 | 9 | |||
| = | 27 | – | 16 | |
| 72 | ||||
| = | 11 | |||
| 72 | ||||
Firm’s Share of Goodwill = 72,000
M’s Share of Goodwill = Firm’s Goodwill X M’s Shares
| M Share of Goodwill | = | 72,000 | X | 3 |
| 9 | ||||
| = | 24,000 |
Gaining Ratio of L and O = 13:11
| L will pay for M’s Share of Goodwill | = | 24,000 | X | 13 |
| 24 | ||||
| = | 13,000 |
| O will pay for M’s Share of Goodwill | = | 24,000 | X | 11 |
| 24 | ||||
| = | 11,000 |
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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