Question 20 Chapter 5 of +2-A
20. A and B are partners sharing profits and losses in the ratio of 2 : 5. They admit C on the condition that he will bring 14,000 as his share of goodwill to be distributed between A and B. C’s share in the future profits or losses will be 1/4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by C will be received by A and B?
The solution of Question 20 Chapter 6 of +2-A
| Old Ratio of A and B | = | 2 : 5 |
| C is admitted for 1/4th share of profit |
Let the total share of the business = 1
Remaining share of A and B after C’s Admission= Total Share – C’s Share
| Remaining share | = | 1 | – | 1 |
| 4 |
| = | 4 – 1 | |
| 4 |
| = | 3 | |
| 4 |
To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’
New Ratio= Combined share of A and B X Old Ratio
| A’s New Ratio | = | 3 | X | 2 |
| 4 | 7 |
| = | 6 | |
| 28 |
| B’s New Ratio | = | 3 | X | 5 |
| 4 | 7 |
| = | 15 | |
| 28 |
| C’s New Ratio | = | 1 | X | 7 |
| 4 | 7 |
| = | 7 | |
| 28 |
| New Profit sharing Ratio between A ,B and C | = | 6 : 15 : 7 |
Distribution of C’s share of Goodwill
C’s share of Goodwill = 14,000
| A’s get share of Goodwill | = | 14,000 | X | 2 |
| 7 | ||||
| = | 4,000 |
| B’s get share of Goodwill | = | 14,000 | X | 2 |
| 7 | ||||
| = | 10,000 |
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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