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Question 14 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Q-14 - CH-6 - T.S. Grewal +2 Book 2019 - Solution-min
Q-14 - CH-6 - T.S. Grewal +2 Book 2019 - Solution-min

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Question 14 Chapter 6 of +2-A

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14. P, Q, R, and S were partners in firm sharing profits in the ratio of 5 : 3 : 1: 1. On 1st January 2019, S retired from the firm. On S’s retirement, the goodwill of the firm was valued at 4,20,000.
The new profit-sharing ratio among P, Q, and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S’s retirement.

The solution of Question 14 Chapter 6 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 R’s Capital A/cDr 84,000 
 To P’s Capital A/c   42,000
 To S’s Capital A/c   42,000
 (Being share of R’s goodwill adjusted)   

Working Note: –

Old Ratio of P, Q, R, and S = 5: 3: 1: 1
S retires from the firm

New Ratio of P, Q, and R = 4: 3: 3

Calculation of Gaining Ratio: –

Gaining Ratio = New Ratio – Old Ratio

P’s Sacrificing Share=45
1010
     
 =45
 10
     
 =1  
 10  

 

Q’s Gaining Share=33
1010
     
 =33
 10
     
 =Nil   
    

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R’s Gaining Share=31
1010
     
 =31
 10
     
 =2  
 10  

 

Firm’s Share of Goodwill =  4,20,000

P’s Share of Goodwill =  Firm’s Goodwill X P’s Sacrificing Shares

P’s Share of Goodwill=4,20,000X1
10
     
 =42,000  

R’s Share of Goodwill =  Firm’s Goodwill X R’s Gaining Shares

R’s Share of Goodwill=4,20,000X2
10
     
 =84,000

 

S’s Share of Goodwill =  Firm’s Goodwill X S’s Sacrificing Shares

S’s Share of Goodwill=4,20,000X1
10
     
 =42,000  

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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)

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

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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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