Question

2. Give Journal entries to record the following arrangements in the books of the firm:
(a) B and Care partners sharing profits in the ratio of 3:2. D is admitted paying a premium (goodwill)
of * 2,000 for 1/4th share of the profits, shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3: 2.D is admitted paying a premium of 2,100
for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C. doubt
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Answer 1

Answer:

2. Give Journal entries to record the following arrangements in the books of the firm:

(a) B and Care partners sharing profits in the ratio of 3:2. D is admitted paying a premium (goodwill)

of * 2,000 for 1/4th share of the profits, shares of B and C remain as before.

(b) B and C are partners sharing profits in the ratio of 3: 2.D is admitted paying a premium of 2,100

for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C. doubt

Answer

(a) JOURNAL

1. Cash a/c.... Dr. 2000

To Premium for Goodwill a/c 2000

(Being premium for goodwill brought in by D)

2. Premium for Goodwill a/c..... Dr. 2000

To B's Capital a/c 1200

To C's Capital a/c 800

(Being premium brought in by D distributed among the partners in the ratio of 3:2)

Working note:

Distribution of goodwill:

B's share= 3/5 * 2000 = 1200

C's share= 2/5 * 2000= 800

(b) JOURNAL

1. Cash a/c........ Dr. 2100

To Premium for Goodwill a/c 2100

(Being premium for goodwill brought in by D)

2. Premium for Goodwill a/c..... Dr. 2100

To B's Capital a/c 1400

To C's Capital a/c 700

(Being premium brought in by D distributed among the partners in the ratio of 2:1)

Working note:

1. Sacrificing ratio:

B's sacrifice= 1/6

C's sacrifice= 1/12

Ratio= 2:1

2. Distribution of goodwill:

B's share= 2/3 * 2100 = 1400

C's share= 1/3 * 2100 = 700