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Question 29 Chapter 3 of Class 12 Part – 1 VK Publication

Question 29 Chapter 3 of Class 12 Part - 1 VK Publication
Question 29 Chapter 3 of Class 12 Part - 1 VK Publication

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Question 29 Chapter 3 of Class 12 Part – 1

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29. A, B and C are partners sharing profits and losses in the ratio of 5:3:2. From 1st April, 2018, they decided to share profits and losses equally. The partnership deed provides that in the event of any change in profit-sharing ratio, goodwill should be valued at two years’ purchase of the average profit of the previous 5 years. The profits and losses of the preceding five years are as follows:

YearRs.
31st March, 2014 (Loss)25,000
31st March, 2015 (Profit)70,000
31st March, 2016 (Profit)45,000
31st March, 2017 (Profit)90,000
31st March, 2018 (Profit)1,20,000

It is the practice of the firm not to show goodwill in the books. Give a journal entry to record the above change.

The solution of Question 29 Chapter 3 of Class 12 Part – 1: –

Journal Entry

Date

Particulars

 

L . FDr. ₹Cr. ₹
2018B’s Capital A/cDr. 4,000 
April 1C’s Capital A/cDr. 16,000 
 To A’s Capital A/c   20,000
 ( Being proportionate share of Goodwill adjusted among partners )    

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Working Notes:

Average Profit =Total Profit 
Total No. of Year
 =-25,000+70,000+45,000+90,000+1,20,0000
5

= Rs. 60,000

Goodwill= Average Profit x Number of Years’ Purchase = 60,000 x 2 = Rs. 1,20,000

Particulars

P

QR
Partners’ Old Ratio5/103/102/10
Partners’ New Ratio1/31/31/3
Difference5/30(-1)/30(-4)/30
Net EffectSacrificeGainGain

Thus Proportionate Share of Goodwill to be adjusted

A= 1,20,000X5
30

= Rs. 20,000 (Cr.)

B = 1,20,000X1
30

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= Rs. 4,000 (Dr.)

C = 1,20,000X4
30

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= Rs. 16,000(Dr.)

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Comment if you have any questions.

Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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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