Question 38 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 38 Chapter 5 of +2-A

Question 38 Chapter 5 of +2-A

38. A, B and C are in partnership sharing profits and losses in the ratio of 5 : 4 : 1 respectively. Two new partners D and E are admitted. The profits are now to be shared in the ratio of 3 : 4 : 2 : 2 : 1 respectively. D is to pay 90,000 for his share of Goodwill but E has insufficient cash to pay for Goodwill. Both the new partners introduced 1,20,000 each as their capital. You
are required to pass necessary Journal entries.

The solution of Question 38 Chapter 5 of +2-A: –

 

Date Particulars
L.F. Debit Credit
  Cash A/c Dr   3,30,000  
  To D’s Capital A/c       1,20,000
  To E’s Capital A/c       1,20,000
  To Premium for Goodwill A/c       90,000
  (Being D and E brought his share of capital and goodwill)        
  C’s Capital A/c Dr   36,000  
  E’s Capital A/c Dr   45,000  
  Premium for Goodwill A/c Dr   90,000  
  To A’s Capital A/c       1,35,000
  To B’s Capital A/c       36,000
  (Being goodwill adjusted with capital accounts )        

Working Note: –

Old Ratio of A and B = 5 : 4 : 1
New Ratio of A, B, and C =  3 : 4 : 2 : 2 : 1

 

A’s Sacrificing Share = 5 3
10 12
  = 30 – 15
60
  = 15 Sacrifice
  60

 

B’s Sacrificing Share = 4 4
10 12
  = 24 – 20
60
  = 4 Sacrifice
  60

 

C’s Sacrificing Share = 1 2
10 12
  = 6 – 10
60
  = (-4) Gain
  60

 

Sacrificing Ratio of A and B = 15 : 4
60 60
  = 15 : 4

 

Gaining share of C = 4  
  60

Distribution of D’s share of Goodwill
D’s share of Goodwill = 90,000
C’s gaining the share in the firm’s profit so only A and B will received the share of goodwill brought by D & E. they will also receive the share of goodwill from C


 

Total Firm’s Goodwill = 90,000 X 12
2
  = 5,40,000
   
C’s Share of Goodwill = Firm’s Goodwill  X  Gaining share of C’s
  = 5,40,000 X 4
60
  = 36,000
   

 

E’s Share of Goodwill = Firm’s Goodwill  X  Share of E’s
  = 5,40,000 X 1
12
  = 45,000
 

Total Goodwill distributed among the sacrificing partners

  = 90,000 + 36,000 + 45,000
  = 1,71,000
Sacrificing Ratio of A and B = 15 : 4

 

A will get Share of Goodwill = C’s, D’s & E’s Goodwill  X  Sacrifice share of A
       
  = 1,71,000 X 15
19
  = 1,35,000

 

A will get Share of Goodwill = C’s, D’s & E’s Goodwill  X  Sacrifice share of A
  = 1,71,000 X 4
19
  = 36,000    

 

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)

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

2 Book 1 min - Question 38 Chapter 5 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.