Question

A and B are partners in a firm sharing profits in the ratio 3:2. They admit C into partnership for 1/5 th share of profits in the firm.The goodwill of the firm is valued at Rs 1,00,000. He is unable to bring in his share of goodwill. What will be the journal entries if:
(a) goodwill is raised at full value and then written off
(b)goodwill is not raised

Answer 1

Answer:

Explanation:

Goodwill A/c ....Dr

To old partners capital account

(Raised)

Then

Old partners capital account ..Dr

To goodwill(cash )a/c

Answer 2

JOURNAL

1. Cash a/c... Dr. 15000

To Premium for goodwill a/c 15000

(Being 60% of premium for goodwill brought in by C)

2. Premium for goodwill a/c... Dr. 15000

C's Capital a/c.... Dr. 10000

To A's Capital a/c 16667

To B's Capital a/c 8333

(Being C's share of goodwill distributed among the partners in the sacrificing ratio)

Working Note:

Calculation of sacrificing ratio:

A's sacrifice= 1/6

B's sacrifice= 1/12

Ratio= 2:1

Goodwill of the firm= 100000

C's share= 1/4 * 100000

= 25000