10 A and B are partners sharing profits. They admit C as a new partner. C contributes stoc 230,000; furniture 40,000: machinery 1,00,000 and cash 20,000 towards the capital and goodwill. Goodwill on the date of admission was valued at 31,80,000. C's share of goodwil and capital respectively will be: (a) 760,000 and 1.30,000 (6) 60,000 and 1,90.000 (c) 260.000 and 60,000 (d) None of the above
Answers
This is a situation of bringing goodwill in kind.
The format of journaling to be followed is:
Assets A/c ... Dr
- To premium for goodwill A/c
- To new partner's capital A/c
(Being the premium for goodwill and the brought in by the new partner.)
Since C wasn't able to bring in goodwill, his share of goodwill will be taken from the existing firm, i.e., from Rs 1,80,000.
There is no specific profit-sharing ratio mentioned either, so the ratio is assumed to be 1:1:1.
C's share of goodwill = Rs 1,80,000 × 1/3 = Rs 60,000
In this case, C brings in Rs 30,000 as Stock, Rs 40,000 as Furniture, Rs 1,00,000 as Machinery and Rs 20,000 as Cash.
Stock A/c ... Dr - Rs 30,000
Furniture A/c ... Dr - Rs 40,000
Machinery A/c ... Dr - Rs 1,00,000
Cash A/c ... Dr - Rs 20,000
- To premium for goodwill A/c - Rs 60,000
- To capital A/c - Rs 1,30,000
(Being the premium for goodwill and the capital brought in by the new partner.)
The capital was determined by subtracting the credit item from the debit items.
Therefore, C's share of goodwill and capital respectively are (a) Rs 60,000 and Rs 1,30,000.