Question

9812 9siodort.RIOSA 34. A, B and C are partners sharing profits in the ratio of 4 : 3: 2 decided to share profits equally. Goodwill of the firm is valued at $10,800. In adjusting entry for goodwill :




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Answer 1

Given data:

• A, B and C are partners sharing profits and losses in the ratio 4:3:2.
• They decided to share profits and losses equally.
• The goodwill of the firm is valued at Rs 10,800.

Objective: To pas‎s the adjusting entry for goodwill.

Answer:

The old shares of each partner:

• For A = 4/9 of the profits/losses
• For B = 3/9 of the profits/losses
• For C = 2/9 of the profits/losses

The new shares of each partner:

• For A = 1/3 of the profits/losses
• For B = 1/3 of the profits/losses
• For C = 1/3 of the profits/losses

Sacrificing/Gaining ratio = Old ratio - New ratio

• If the difference is positive, it indicates a sacrifice.
• If the difference is negative, it indicates a gain.

Calculation of sacrificing/gaining ratio:

For A:

• Sacrifice/Gain = 4/9 - 1/3 = (4 - 3)/9 = 1/9 [Sacrifice]

For B:

• Sacrifice/Gain = 3/9 - 1/3 = (3 - 3)/9 = 0

For C:

• Sacrifice/Gain = 2/9 - 1/3 = (2 - 3)/9 = -1/9 [Gain]

Distribution of goodwill:

For A:

• 1/9 × Rs 10,800 = Rs 1,200

For C:

• 1/9 × Rs 10,800 = Rs 1,200

Adjusting entry:

Gaining partner(s)' capital A/c ... Dr

• To Sacrificing partner(s)' capital A/c

C's capital A/c ... Dr - Rs 1,200

• To A's capital A/c - Rs 1,200