Question

A, B and C are partners sharing profits equally. They decided that in future, C will get 1/5th share in profits. On the day of change, firm's goodwill is valued at Rs. 6,00,000. Complete the journal entry. Date (4) Particular L.F Dr. 40,000 Cr. Dr. Dr. To (C compensate by A and B for the sacrificing made by him)​

Answer 1

Answer:

C'S               A/C         DR    1,20,000

      TO A'S  A/C                                       60,000

      TO B'S   A/C                                     60,000

( BEING HE INCOMING PARTNER SHARE OF GOODWILL

   IS SHARED AMONG THE OLD PARTNERS IN SACRIFICING RATIO)

Explanation:

OID RATIO OF A&B IS 1:1 (SHARING EQUALLY)

C'S AGREED SHARE IS 1/5

REMAININGSHARE = 1-1/5 = 4/5

A NEW RATIO = 1/2 * 4/5 = 4/10

B NEW RATIO = 1/2 * 4/5 = 4/10

C NEW RATIO = 1/5 * 2/2 = 2/10

A:B:C = 4:4:2 ie 2:2:1

 

SACRIFICING RATIO =OLD - NEW

A SACRIFICE = 1/2 - 2/5 = 2/10

B SASRFICE =  1/2 - 2/5 = 2/10

                           SACRIFICING RATIO = 2:2 =1:1

TOTAL GOODWILL OF THE FIRM = 6,00,000

C SHARE = 6,00,000/5 = 1,20,000

A WILL GET 60,000

B WILL GET 60,000

ADJUSTMENT ENTRY IS  

C'S               A/C         DR    1,20,000

      TO A'S  A/C                                       60,000

      TO B'S   A/C                                     60,000

( BEING HE INCOMING PARTNER SHARE OF GOODWILL

   IS SHARED AMONG THE OLD PARTNERS IN SACRIFICING RATIO)