Question 17 Chapter 6 of +2-A
Table of Contents
Hanny, Pammy, and Sunny are partners sharing profits in the ratio of 3: 2: 1. Goodwill is appearing in the books at a value of 60,000. Pammy retires and at the time of Pammy’s retirement, goodwill is valued at 84,000. Hanny and Sunny decided to share future profits in the ratio of 2: 1. Record the necessary journal entries.
The solution of Question 17 Chapter 6 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Hanny’s Capital A/c | Dr | 30,000 | |||
| Pammy’s Capital A/c | Dr | 20,000 | |||
| Sunny’s Capital A/c | Dr | 10,000 | |||
| To Goodwill A/c | 60,000 | ||||
| (Being Goodwill in books written off in the old ratio i.e. 3:2:1) | |||||
| Hanny’s Capital A/c | Dr | 14,000 | |||
| Sunny’s Capital A/c | Dr | 14,000 | |||
| To Pammy’s Capital A/c | 28,000 | ||||
| (Being share of Pammy’s goodwill adjusted) | |||||
Working Note: –
Old Ratio of Hanny, Pammy and Sunny = 3: 2: 1
Pammy retires from the firm
New Ratio of Hanny and Sunny = 2: 1
Calculation of Gaining Ratio: –
Gaining Ratio = New Ratio – Old Ratio
| Hanny’s gaining Share | = | 2 | – | 3 |
| 3 | 6 | |||
| = | 4 | – | 3 | |
| 6 | ||||
| = | 1 | |||
| 6 | ||||
| Sunny’s Gaining Share | = | 1 | – | 1 |
| 3 | 6 | |||
| = | 2 | – | 1 | |
| 6 | ||||
| = | 1 | |||
| 6 | ||||
Firm’s Share of Goodwill = 84,000
Pammy’s Share of Goodwill = Firm’s Goodwill X Pammy’s Shares
| Pammy’s Share of Goodwill | = | 84,000 | X | 2 |
| 6 | ||||
| = | 28,000 |
Gaining Ratio of Hanny and Sunny = 1:1
| Hanny’ gain | = | B’s Goodwill | X | Gaining share of Hanny |
| = | 28,000 | X | 1 | |
| 2 | ||||
| = | 14,000 |
| Sunny ’ gain | = | Manisha’s Goodwill | X | Gaining share of Sunny |
| = | 28,000 | X | 1 | |
| 2 | ||||
| = | 14,000 |
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
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