Question

A&B are partner in a firm sharing profit in the ratio of 3: 2 . They admitted C as a new partner. They new profit Sharing ratio between A, B & C will be 5:3:2 C brings 75000 as capital and 25000 for share of goodwill pass necessary journal entries???

Answer 1

Answer:

There are two partners A and B,

Old profit sharing ratio = 3: 2

Then they admitted C as a new partner

New profit sharing ratio: A:B:C = 5:3:2

C brings capital = 75000 and Goodwill = 25000

A's sacrificing ratio = $\frac{3}{5} \times\frac{2}{2}- \frac{5}{10}$

                                = $\frac{1}{10}$

B's sacrificing ratio =  $\frac{2}{5} \times\frac{2}{2}- \frac{3}{10}$

                                = $\frac{1}{10}$

Journal Entries are as follows:

(1) Cash A/C           Dr.  100,000

   To Premium for Goodwill A/C       25,000

   To capital A/C                                  75,000

(capital and goodwill brought in by a new partner)

(2) Premium A/C          Dr.    25,000

     To A's capital A/C                         12,500

     To B's capital A/C                         12,500

(Goodwill brought in by a new partner divided among the old partners equally)