A and B are partners in a firm sharing profits in the ratio of 7:5. On April 1,2019 they admit C as a new partner for 1/6th share. The new ratio will be 13:7:4. C contributed the following assets towards his capital for his share of goodwill: Stock Rs.60,000;Debtors Rs.80,000; Land Rs.2,00,000; Plant and Machinery Rs.1,20,000. On the date of C's admission the goodwill of the firm was valued at Rs.7,50,000. Record the necessary Journal entries in the books of the firm.
Answers
Answer:
700000 lakh 50000 for new books
Answer:
1. A's Capital a/c.... Dr. 1800
B's Capital a/c.... Dr. 1200
To Goodwill a/c 3000
(Being goodwill written off in the ratio of 3:2)
2. Cash a/c.. Dr. 40000
To C's Capital a/c 30000
To Premium for goodwill a/c 10000
(Being capital and premium for goodwill brought in by C)
3. Premium for Goodwill a/c... Dr. 10000
To A's Capital a/c 5000
To B's Capital a/c 5000
(Being premium for goodwill brought in by C distributed among the partners in the ratio of 1:1)
Working Note:
1. Calculation of sacrificing ratio:
A's sacrifice= 3/5- 5/10= 1/10
B's sacrifice= 2/5- 3/10= 1/10
Sacrificing ratio= 1:1
2. Distribution of premium for goodwill:
A's share= 10000 * 1/2= 5000
B's share= 10000 * 1/2= 5000