Question 39 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 39 Chapter 5 of +2-A

Question 39 Chapter 5 of +2-A

39. Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ram for 1/4th share on 1st April, 2019. It was agreed that goodwill of the firm will be valued at 3 years’ purchase of the average profit of last 4 years ended 31st March, were 50,000 for 2015-16, 60,000 for 2016-17, 90,000 for 2017-18 and 70,000 for 2018-19. Ram did not bring his share of goodwill premium in cash. Record the necessary Journal entries in the books of the firm on Ram’s admission when:
(a) Goodwill appears in the books at 2,02,500.
(b) Goodwill appears in the books at 2,500.
(c) Goodwill appears in the books at 2,05,000.

The solution of Question 39 Chapter 5 of +2-A: –

(a) Goodwill appears in the books at 2,02,500.

Date Particulars
L.F. Debit Credit
  Mohan’s Capital A/c Dr   1,21,500  
  Sohan’s Capital A/c Dr   81,000  
  To Goodwill A/c       2,02,500
  (Being goodwill written off which is already in the books)        
  Ram’s Capital A/c Dr   50,625  
  To Mohan’s Capital A/c       30,375
  To Sohan’s Capital A/c       20,250
  (Being Ram’s share of goodwill adjusted with his capital account)        

 

(b) Goodwill appears in the books at 2,500.

Date Particulars
L.F. Debit Credit
  Mohan’s Capital A/c Dr   1,500  
  Sohan’s Capital A/c Dr   1,000  
  To Goodwill A/c       2,500
  (Being goodwill written off which is already in the books)        
  Ram’s Capital A/c Dr   50,625  
  To Mohan’s Capital A/c       30,375
  To Sohan’s Capital A/c       20,250
  (Being Ram’s share of goodwill adjusted with his capital account)        

 

(c) Goodwill appears in the books at 2,05,000.

Date Particulars
L.F. Debit Credit
  Mohan’s Capital A/c Dr   1,23,000  
  Sohan’s Capital A/c Dr   82,000  
  To Goodwill A/c       2,05,000
  (Being goodwill written off which is already in the books)        
  Ram’s Capital A/c Dr   50,625  
  To Mohan’s Capital A/c       30,375
  To Sohan’s Capital A/c       20,250
  (Being Ram’s share of goodwill adjusted with his capital account)        

 

Working Note: –

 

Average Profit = Total Profit for past given years
Number of years
  = 50,000 + 60,000 + 90,000 + 70,000
4
  = 2,70,000
4
  = 67,500

Number of years’ purchase = 3

Goodwill = Average Profit X  Number of years’ purchase
  = 67,500 X  3
  = 2,02,500  

 

Ram’s Share of Goodwill = Firm’s Goodwill  X  Share of E’s
  = 2,02,500 X 1
4
  = 50,625
   

Sacrificing Ratio of Mohan and Sohan = 3 : 2

Mohan will get Share of Goodwill = Ram’s Goodwill  X  Sacrifice share of A
  = 50,625 X 1
12
  = 45,000
 

 

A will get Share of Goodwill = C’s, D’s & E’s Goodwill  X  Sacrifice share of A
       
  = 50,625 X 3
5
  = 30,375

 

Sohan will get Share of Goodwill = Ram’s Goodwill  X  Sacrifice share of A
  = 1,71,000 X 2
5
  = 20,250    

 

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 39 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.