Question

7. X, Y and Z are equal partners with capitals of 15,000; * 17,500 and 20,000 respectively. They agree
to admit W into equal partnership upon payment in cash 15,000 for 1/4th share of the goodwill and
18,000 as his capital, both sums to remain in the business. The liabilities of the old firm were 30,000
and the assets, apart from cash, consist of Motors * 12,000, Furniture 4,000, Stock 26,500 and Debtors
37,800. The Motors and Furniture were revalued at 9,500 and 3,800 respectively.
Pass Journal entries to give effect to the above arrangement and also show Balance Sheet of the
new firm.​

Answer 1

Explanation:

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Answer 2

         Journal Entries at the time of admission

Revaluation A/C DR 2,700

                  To Furniture A/C  200

                   To Motor A/C 2,500

( Being the value of furniture and motor reduced )

X's Capital A/C DR 900

Y's Capital A/C DR 900

Z's Capital A/C  DR 900

                    To Revaluation A/C 2,700

( Being loss of revaluation distributed among partners )

Cash  A/C DR 33,000

                 To W's Capital A/C 18,000

                 To Premium for goodwill A/C 15,000

( Being cash brought in by a new partner as his share of goodwill and capital )

The premium for goodwill A/C DR 15,000

                         To X's Capital A/C 5,000

                          To Y's Capital A/C 5,000

                           To Z's Capital A/C 5,000

( Being premium distributed to sacrificing partners )

                   Balance Sheet of the new firm

ASSET -

Motors - 9,500

Furniture - 3,800

Stock - 26,500

Debtors - 37,800

Cash - 33,000

Cash ( Balancing Figure ) - 2,200

Total = 1,12,800

LIABILITIES -

Liabilities - 30,000

X's Capital -  19,100

Y's Capital - 21,600

Z's Capital - 24,100

W's Capital - 18,000

Total = 1,12,800

 Balance Sheet of the new firim is given above.