Question

A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C paying a
premium for 1/4th share while A and B as between sharing profits and losses equally. Goodwill
already appears at Rs. 3,000. The goodwill of the firm is values at Rs. 2,400.40% of goodwill
is withdrawn by the partners. Give the necessary journal entries.​

Answer 1

Answer:

JOURNAL

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

Explanation:

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