17 Anil, Amar and Ankur are partners in a firm sharing profits in the ratio 2:2:1. On
March 31, 2019 Amardies. On this day the balance in their capital accounts
stood at 1,10,000, 270,000 and 50,000 respectively and it was found that
Patents were undervalued by 20,000 which was to be considered. Amar's
executor was paid 90,000 in full settlement Calculate Amar's share of goodwill
and pass Journal Entry for patents and goodwill.
Anil and Ankur decided to share future profits equally
Answers
1. Nitin's capital A/c 4000
Tarun's capital A/c 4000
To Amar's capital A/c 8000
(Being adjustment made for reserve assuming that there is no decrease in value of investments)
2. Nitin's capital A/c 4000
Tarun's capital A/c 4000
To Amar's capital A/c 8000
(Being adjustment made for reserve)
3. Nitin's capital A/c 2400
Tarun's capital A/c 2400
To Amar's capital A/c 4800
(Being adjustment made for reserve)
4. Investment fluctuation reserve A/c.................Dr. 30000
To Investments A/c 30000
(Being decrease in the market value of investment adjusted through reserve)
Nitin's capital A/c 2000
Tarun's capital A/c 2000
To Amar's capital A/c 4000
(Being adjustment made for balance reserve)
5. Investment fluctuation reserve A/c.................Dr. 60000
Profit and Loss A/c.............................................Dr. 30000
To Investments A/c 90000
(Being decrease in the market value of investment adjusted through reserve)
Notes:
1. Calculation of gaining and sacrificing ratio
Nitin: 2/5 - 1/3 = 1/15
Tarun: 2/5 - 1/3 = 1/15
Amar: 1/5 - 1/3 = (2/15)
2. It is assumed that the partners decide to maintain the investment reserve in future.