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Question 38 Chapter 5 of +2-A
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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 |
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| B’s Sacrificing Share | = | 4 | – | 4 |
| 10 | 12 |
| = | 24 – 20 | |
| 60 |
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| = | 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 |
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| 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)
- 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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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